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Dairi Prima Mineral Zinc Mine

Dairi Regency, North Sumatra, Indonesia
Updated on 31 March 2023.
Dairi Prima Mineral (DPM) is a joint venture between Chinese mining conglomerate China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (NFC) and Bumi Resources Minerals, a subsidiary of the Indonesian coal-mining giant Bumi Resources. The company is constructing an underground mine in North Sumatra, which will focus on extraction of zinc. The project is controversial in large part due to its location in an area with high earthquake risk, which makes the danger of tailings dam collapse high. There are also major concerns related to the potential for acid-mine drainage. Local communities filed complaints with local authorities and with the World Bank’s accountability watchdog, which confirmed that the project represented extreme risk. Despite this, the Indonesian government still provided environmental approval for the mine.

Basic Information

Chinese Name:  达瑞铅锌矿
Location: Dairi Regency, North Sumatra, Indonesia
Type of project: Extractive
Project Developers: PT Dairi Prima Mineral (DPM), a subsidiary of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (NFC), which is a subsidiary of China Nonferrous Metal Mining (Group) Co., Ltd. (CNMC), and Bumi Resources Minerals
Main Contractors: China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.; JCHX Mining Management Co., Ltd.; China No.15 Metallurgical Construction Group Co., Ltd (a subsidiary of CNMC); China Nerin Engineering Co., Ltd.
Known Financiers: n/a
Cost: Up to 453 million USD 
Project Status: Under construction

Credit (CC): Aul Rah.

Project Outline

The Dairi Prima Mineral (DPM) mine is located in a mountainous region of the Dairi Regency in North Sumatra, Indonesia. The company is in the process of constructing an underground mine for the extraction of zinc, lead, and silver ore—with a focus on zinc. The mine has been under consideration since 1998, when the Indonesian Government granted DPM permission to explore for metals over a 27,420-hectare area (which has since been reduced to around 24,600 hectares). As of 2019, the project was expected to cost 453 million USD. It is unclear whether the project has yet reached financial close or secured insurance, but the company has stated that mining will commence within 42 months after finance is secured.

The company plans to use underground mining techniques to extract the ore, which will be concentrated at a facility close to the mine. The company claims the majority of the tailings from the mine will be mixed with cement and injected back underground, and the remaining toxic waste will be stored in a tailings dam two kilometres from the mine.

DPM is a joint venture between Chinese mining conglomerate China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (NFC), and Bumi Resources Minerals, a subsidiary of the Indonesian coal-mining giant Bumi Resources. NFC became involved in the project in 2014, when it was selected as the contractor to design and build the mine. The company also signed an agreement later that year to buy and distribute most of the mine’s output. In October 2018, NFC became an owner in the mine when it bought a 51% stake in DPM.

NFC remains the engineering, procurement, and construction (EPC) contractor of the mine. China Nerin Engineering Co., Ltd., whose biggest shareholder is NFC, was contracted for the design and technical service of the project in 2018. The Chinese company JCHX Mining Management was contracted in 2019 for developing the underground mining system and China No.15 Metallurgical Construction, also belonging to the same group as NFC, signed the contract for site levelling. 

NFC’s controlling shareholder is China Nonferrous Metal Mining Group (CNMC), a central state-owned enterprise fully owned by the Chinese government. CNMC holds the largest stake in NFC (33.75%), and the remainder of its shares are publicly traded on the Shenzhen Stock Exchange. Shares in Bumi Resources Minerals are traded on the Jakarta and Frankfurt stock exchanges. As of September 2022, the top shareholder of Bumi Resources Minerals was venture capital firm Emirates Tarian Global, followed by PT Bumi Resources, holding a 20% stake. In turn, PT Bumi Resources is majority owned by Indonesian conglomerate Salim Group, although the China Investment Corporation, China’s flagship sovereign wealth fund, holds a 10% stake.

NFC describes DPM as an important project in the company’s efforts to actively implement the Belt and Road Initiative (BRI), but it is unclear if it is covered by any bilateral agreements between China and  Indonesia regarding BRI cooperation.

Bumi Resources has also received financing from Chinese banks and financial institutions. In 2017, after defaulting on loan repayments, Bumi Resources entered into a debt restructuring agreement with its lenders, including China Investment Corporation (CIC) and China Development Bank (CDB). The lenders could choose different ways of restructuring, including issuance of shares or issuance of new debt instruments. CIC chose to acquire equity shares while CDB chose to reschedule its debt under new terms. As part of this restructure, both CIC and CDB also took seats on Bumi Resource’s board of directors.

DPM has stated that 80% of the project cost would be raised via loans from Chinese banks and 20% from its own equity. Although it is unclear if financing has been secured, company documents show that the NFC has strong relationships with Bank of China and Industrial and Commercial Bank of China (ICBC), as well as Sinosure, all of which have provided finance/insurance to the company in the past, and have attended DPM events. Postal Savings Bank of China had provided several general corporate loans to NFC. The World Bank’s International Finance Corporation (IFC) holds an equity stake in Postal Savings Bank, which opened the door to a community complaint to the IFC’s grievance mechanisms (see below). Postal Savings Bank of China’s lending to NFC, however, ended during 2022.

NFC plans to sell the zinc and lead from the DPM mine to both Chinese and Indonesian refineries, but Indonesian law now states that refining must be done within Indonesia. It is unclear how NFC will supply the DPM ores to Chinese refineries while complying to the Indonesian regulation, or which refineries would receive them. The exact end users of DPM zinc, when it comes online, remain uncertain.

Project Impacts

  • Health & Safety: The mine site and associated tailings dam are located in an area that is one of the most active earthquake zones in the world. The site is approximately 14 kilometres from the Great Sumatran Fault. Should the area experience a serious earthquake, there is a high risk of tailings dam failure, which would potentially result in serious harm to 11 nearby and downstream villages.
  • Pollution: Lead-zinc mines are among the most high-risk types of mine in terms of pollution, as the mining process produces sulfide ore. This can create sulfuric acid which takes heavy metals into solution and can leach into and pollute overland flows and groundwater. Transportation of the extracted ore is also expected to result in contamination of the road routes to export ports.
  • Indigenous Peoples: Indigenous and other local communities downstream of the mine have not provided their free, prior, and informed consent for the project to go forward.
  • Governance: The whole process of developing plans for the mine and securing approvals has been characterised by a lack of transparency and inadequate consultation with local people. Local legal experts have analysed compliance with Indonesian laws and found a number of significant non-compliance issues.

The mine was first approved in 2005 but plans for the project were subsequently changed significantly. However, development of the project continued without updated assessments. In 2019, the Ministry of Environment and Forestry informed DPM that they needed to produce an addendum to their environmental impact assessment reflecting the changes in the plans for the project, including the already-constructed explosives storage facility. A 490-page addendum was completed in October 2019, which was shared with local NGOs on 30 June 2020. This came with an attached letter stating that the deadline for written comments was 29 June—the day before they received the document. This episode is emblematic of the lack of transparency and consultation in the planning and approval of the project as a whole. Repeated requests by nongovernmental organisations for information about the process and timeline for review of the EIA Addendum were ignored, as were requests for specific geological information that would allow full assessment of risk of earthquake-related failure of the proposed tailings dam (international best practice guidelines state that this information should be public and independent review of tailings dam stability must be undertaken).      

In May 2021 an EIA hearing was conducted, in which the Ministry of Environment and Forestry noted significant concerns with the EIA Addendum and notified that a further update was required. However, the ministry provided DPM with Environmental Approval in mid-2023. Later, at a public meeting, community legal representatives requested a copy of the final approved EIA Addendum. No documents were provided, and the legal representative was physically removed from the meeting (according to information provided by local civil society groups).

One of the main concerns regarding the project is around safety. The project and its tailings dam will be located in a high earthquake risk area. An expert report by Dr Richard Meehan, a Stanford University engineer specialising in dam design and safety, on the seismic risks associated with the project, found that the mine is located in ‘one of the highest risk areas in the world’, close to the Sumatra subduction megathrust, which produced earthquakes of magnitude 9 and 8+ in 2004 and 2005, respectively. The site is also 15 kilometres from the Great Sumatra fault which produces long duration or repeated earthquakes, which can destroy structures such as tailings dams. The area also experiences extremely heavy annual rainfall, and the topography of the area includes layers of volcanic ash known for their potential instability. These factors led the author of the study to conclude that an earthquake-induced sudden failure of the tailings dam would send ‘a wave of liquid mud downstream to the north.’

This is exacerbated by the foundations for the proposed tailings storage facility being unconsolidated volcanic ash prone to movement and landslides. Collapse of the tailings storage facility could result in over 1 million tons of toxic waste to flow over some of the 11 villages downstream before making its way down to the Alas River system and into endangered orangutan habitat in Aceh province. In an interview with Yale Environment 360 in 2021, Meehan, said tailings dam failure is a ‘virtual certainty’ in the proposed location. There are 11 villages nearby or downstream from the proposed mine. In a review of the EIA addendum, Dr Steven Emerman, a mining hydrologist formerly at Utah Valley University reported that the proposed tailings dam is only 400 meters upstream from an established settlement, which would not have been allowed in China, according to the Work Plan for Preventing and Defusing Tailings Dam Safety Risks (Emergency [2020] #15).

In June 2019, the company built an explosives storage facility 50 metres away from Sipat sub-village. Local NGOs inspected the site, which they were informed has the capacity to hold 5,000 kilograms of dynamite and 100 tonnes of ammonium nitrate. They allege this was built without a valid environmental approval, which could be grounds for legal action. Indeed, the Addendum to the DPM environmental impact assessment requested approval for the new site—but the facility near Sipat had been built already. DPM promised to the EIA Assessment Commission that the facility would be removed by December 2021, but it still remains in situ in early 2023. This has raised concerns as NFC has in the past been involved in an explosives disaster, when a blast at an explosives factory run by a subsidiary in Zambia killed at least 50 workers in 2005.

From an environmental perspective, lead-zinc mines can be highly polluting. The mining process will extract sulfide ore, which, when exposed to water and oxygen, can form sulfuric acid. This can lead to acid mine drainage, a process through which heavy metals become dissolved in water and then spread throughout the water system. One study by scientists from Kyushu University, Japan, and Bandung Institute of Technology, Indonesia, found that the main ore body was particularly problematic with regard to potential for acid mine drainage.

In his review of the draft addendum to the project’s environmental impact assessment, Dr Steven Emerman found that DPM was basing waste containment plans on a 100-year flood event, which is much less than the Probable Maximum Flood required by international standards and Indonesian guidelines. There are also numerous contradictions of data in the assessment, including the precipitation data used for the project design. Even based on the problematic monthly precipitation data used for the project design, following closure of the tailings dam, the flow of untreated toxic and acidic tailings pond water through the emergency spillway and into downstream water bodies will occur 15% of the time. Such a frequent discharge of untreated mine wastewater into downstream water bodies must be regarded as unacceptable by any standard, according to Dr Emerman.

The mine is also likely to create impacts from dust and from an increase in heavy traffic passing through nearby residential and farming areas.

Indonesian lawyers conducted a legal analysis of the project and found numerous legal compliance issues, including: inadequate community consultation, improper extension of the mining license period, failure to obtain new environmental approvals after adjusting the project plans, inadequate information disclosure, lack of approval for the explosives storage facility, proximity of the facility to residential areas, and lack of disaster risk analysis, among other issues. They also question the validity of the processes for the Environmental Approval being issued.

Due to the various concerns about the potential impacts of the project, local community members have sent numerous complaints to local authorities, with limited results. After discovering in 2019 that the International Finance Corporation (IFC), the arm of the World Bank Group focussed on private sector investment, was exposed to the project, affected communities filed a complaint with the IFC’s Compliance Advisor Ombudsman (CAO). The complaint stated that the Indigenous communities downstream from the mine have not been adequately consulted about the project, and have not provided their free, prior, and informed consent, as required under IFC Performance Standards. The complaint also voiced concerns about the environmental and social risks of the project, including the high risk of a tailings dam failure. In March 2020, the CAO accepted the complaint. This is the first complaint involving a Chinese financial intermediary accepted by the CAO.

The CAO decided not to initiate a compliance investigation in response to this complaint. Although it found the complaint met the criteria for an investigation, at the time the appraisal was conducted, Postal Savings Bank of China no longer had active loans with NFC or its parent company, meaning the IFC was no longer exposed to the project. However, the appraisal report ultimately vindicated the concerns of local communities. An independent dam safety expert that assessed the project for the CAO report concluded that ‘given the combination of high seismic risk, high rainfall, the ultimate height of the proposed dam, and the downstream location of villages, a tailings dam failure at the [Dairi Prima Mineral] site would be considered ‘extreme’ under the [Australian National Committee on Large Dams] Guidelines on Tailings Dams.’ The DPM project claims to adhere to the standards of these Guidelines. The report also noted that the project poses a threat to thousands of people through acid mine drainage, contamination of surface and groundwater, and potential failure of the dam structure. The report also identified the flaws in the Addendum, noting that no information is available beyond, ‘the first eight years of the projected 30-year mine life’.

In-depth Sources

  • Bongkaras Village and Pandiangan Village representatives. 2019. ‘Complaint concerning IFC investments in: PT Dairi Prima Minerals (DPM).’ 29 October. Link.
  • Compliance Advisor Ombudsman. 2022. ‘CAO Assessment Report: Regarding Concerns in Relation to IFC’s Investment in Postal Savings Bank of China (PSBC) (#35461) and Issues Raised in North Sumatra, Indonesia.’ Office of the Compliance Advisor Ombudsman, 19 January. Link to English version / Link to Bahasa Indonesian version.
  • Compliance Advisor Ombudsman. 2022. ‘Compliance Appraisal of a Complaint Regarding IFC’s Exposure to the Dairi Prima Mineral Mine in Indonesia Through an Investment in Postal Savings Bank of China.’  Office of the Compliance Advisor Ombudsman, 6 July. Link to English version / Link to Bahasa Indonesian version.
  • Emerman, Stephen H. 2021. ‘Hydrologic Aspects of the Updated Addendum to the Environmental Impact Statement for the DPM Lead-Zinc Mine, North Sumatra, Indonesia.’ Malach Consulting, 8 August. Link.
  • Inclusive Development International. 2020. ‘Following the Money Behind the Dairi Prima Mineral Zinc and Lead Mine in North Sumatra, Indonesia.’ Inclusive Development International website, 10 July. Link to English version / Link to Bahasa Indonesian version.
  • Inclusive Development International. 2020. ‘World Bank Watchdog Accepts Complaint Regarding High-risk Indonesian Zinc Mine in Earthquake Zone.’ Inclusive Development International website, 21 July. Link. 
  • Inclusive Development International. Undated. ‘Indonesia: Dairi Prima Mineral Zinc Mine.’ Inclusive Development International website. Link. 
  • Jaringan Advokasi Tambang (JATAM), Perhimpunan Bantuan Hukum dan Advokasi Rakyat Sumatera Utara (Bakumsu), and Yayasan Diakonia Pelangi Kasih (YDPK). 2020. ‘Kepatuhan Hukum PT Dairi Prima Mineral [PT Dairi Prima Mineral Legal Compliance].’ Link. 
  • Jaringan Advokasi Tambang (JATAM) and Perhimpunan Bantuan Hukum dan Advokasi Rakyat Sumatera Utara (Bakumsu). 2020. ‘Analisis Hukum: Pengembangan Proyek Pertambangan PT. Dairi Prima Mineral di Kecamatan Silima Pungga-Pungga, Kabupaten Dairi, Provinsi Sumatera Utara [Legal Analysis: Mining Project Development PT. Dairi Prima Mineral in Silima Pungga-Pungga Sub-district, Dairi Regency, North Sumatra Province].’ Link to English version / Link to Bahasa Indonesian version.
  • Meehan, Richard L. 2020. ‘Memo: Dairi Prima Minerals (DPM) Mine Site Risks and Tailings Disposal Safety.’ Inclusive Development International website, 17 April. Link to English version / Link to Bahasa Indonesian version / Link to Chinese version.
  • Meehan, Richard L. 2021. ‘Dairi Prima Minerals (DPM) Mine site risks and Tailings disposal safety. Review of Dairi 2021 EIA Addendum.’ Link.
  • Nguyen, Sen. 2020. ‘IFC Watchdog Investigates Postal Savings Bank of China over Loan for Indonesian Mine.’ South China Morning Post, 27 July. Link.
  • Panggabean, Tongam and Dustin Roasa. 2021. ‘Disaster Shadows Chinese Mining Ventures in Southeast Asia.’ The Diplomat, 28 January. Link.
  • Pearce, Fred. 2021. ‘Why a Big Mining Project Could Wipe Out Rural Villages in Indonesia.’ Yale Environment 360, 25 March. Link.
  • Perhimpunan Bantuan Hukum dan Advokasi Rakyat Sumatera Utara (Bakumsu). 2021. ‘Indonesia: Mencegah Resiko Bencana Tambang Dairi Prima Mineral / Indonesia: Preventing the Looming Dairi Prima Mineral Mine Disaster’. Link to English version / Link to Bahasa Indonesian version.
  • Simangunsong, Tonggo. 2021. ‘Indonesian Community Seeks World Bank’s Mediation Against Chinese-owned Zinc Mine.’ China Dialogue, 22 March. Link.

Updates & Corrections

15 April 2021: The pin was in the wrong spot on the map. This now has been fixed.

31 March 2023: We updated shareholder and contractor information, information regarding approval of EIA addendum and results of Compliance Advisor Ombudsman appraisal. We also included details from technical expert review on EIA addendum and added new sources.

Updated on 31 March 2023.

Inclusive Development International (IDI) is an independent, not-for-profit organisation dedicated to supporting communities to defend their rights and resources in the face of harmful corporate activities and creating a more just and inclusive global economy.