On March 19th, 1997 Michael de Guzman, the exploration manager for would-be miner Bre-X, jumped from an Alouette helicopter flying eight-hundred feet above the Indonesian jungle. The official version of the events state that de Guzman was suffering from hepatitis B and a tormented conscience. He left behind a few hastily scrawled suicide notes, a Rolex watch and a slew of unanswered questions and speculation – his body was never found.

In the days that followed, it was revealed that de Guzman had carried out the biggest mining fraud in modern history. Shares of Bre-X surged from just pennies to more than $280 a share. But when the Indonesian government brought in mining giant Freeport-McMoRan to confirm the deposit, they found nothing. In all, investors were swindled out of $6 billion.The Busang deposit in Borneo, Indonesia, which at the time was rumoured to be the largest gold deposit in the entire world, contained only trace amounts of gold.

The irony in the historic Bre-X swindle is that Indonesia actually does boast the world’s largest gold mine. The Grasberg Mine, located in the province of Papua, Indonesia, is the largest gold mine in the world. And the Grasberg mining district is believed to contain the world’s largest recoverable gold reserve. It is majority owned through a subsidiary by Freeport-McMoRan Copper & Gold (NYSE: FCX). Annual production from the Grasberg Mine is estimated at over 58,000,000 grams of gold; along with 600,000 tonnes of copper; and 170,000,000 grams of silver.

These days, a regulatory overhaul of Indonesia’s mining industry in early 2011 is likely to weaken the financial performance of companies operating there and it may also make the Asian nation less attractive for foreign investment. Instated in January, the new law aims to squeeze more revenue from the mining sector and secure domestic supplies of minerals such as coal and metals for their home market where demand is expected to surge.

The Indonesian government has set domestic coal consumption targets at 75 million tonnes for this year, which is thirty percent of total Indonesia coal production. It is yet to be determined which metal products will be included for the domestic market obligation. The new mining law, however, will require miners to process mineral products domestically by setting up their own smelters or using independent domestic smelters. There is a lack of processing capacity in Indonesia so, either way, the process is expected to slow output.

Recently, Xavier Jean, a Standard & Poor’s credit analyst stated, “Some (of the new) regulatory provisions have direct implications for the revenues, profitability, capital expenditure, and cash flows of mining companies in Indonesia.” He also said, “Besides increasing operating uncertainty for Indonesian mining companies, we believe the new regulations may also make the industry less attractive to foreign investors.”

Following a 10-year exodus of junior mining companies from Indonesia in the aftermath of the Bre-X scandal, Southern Arc Minerals (TSXV:SA) was one of the first Canadian junior exploration companies to return to Indonesia in 2005. Southern Arc management saw the mass departure from Indonesia as a unique window of opportunity. The company currently has four projects on the islands of Lombok and Sumbawa. Three of the projects are located on Sumbawa which hosts Newmont’s Batu Hijau mine. Newmont Mining (TSX:NMC) recently sold the final 7-per-cent divestiture stake in PT Newmont Nusa Tenggara subsidiary to an agency of the Indonesian government’s Ministry of Finance as required under the terms of the contract of work with the Indonesian government.

Intrepid Mines (TSX:IAU) is an Australian-based precious metals development and exploration company with primary operations in Indonesia. The companies lead project, Tujuh Bukit located on the island of Java, is reported to contain an inferred resource estimate of over two million ounces of gold and nearly eighty million ounces of silver. Another junior actively exploring a number of prospective prospects in Indonesia is East Asia Minerals (TSXV:EAS). The company owns a majority interest in 6 epithermal gold and porphyry copper-gold properties scattered throughout the island nation.

Challenger Deep Resources (TSXV:CDE) is an Alberta-based junior miner focused exclusively on coal in Indonesia, specifically in East Kalimantan. The company was established to take advantage of what management believes is “an under-exploited opportunity” in the region.