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Indonesian government agrees to ease export ban 10-Jan-2014

The government has finally agreed to ease the ore-export ban just a few days before the Sunday deadline amid protests from the country’s mining companies including PT Freeport Indonesia and PT Newmont Nusa Tenggara.

The new policy, which will allow mining companies to continue to export their mineral concentrates until 2017, is subject to approval from President Susilo Bambang Yudhoyono (SBY), who last week asked related ministers to find a loophole in the export ban.

Energy and Mineral Resources Minister Jero Wacik said on Wednesday that mining companies that had indicated their strong commitment to constructing smelters would be allowed to continue to export their mineral products.

For that purpose, the government had also agreed to reduce the minimum purity rate of the mineral products that could be exported so that the miners could continue to export their mineral concentrates, Jero said following a meeting with ministers from related ministries.

The meeting was held to find a legal loophole that could be used to bypass an article in the 2009 Mining Law that requires miners to process their ores in local smelters before selling them overseas. The measure, which will technically ban miners from exporting their unprocessed ores, will be implemented by Sunday. 

To implement the ban, the Energy and Mineral Resources has set minimum purity levels for each mineral product to determine that added-value activities have been created. However, the regulation on the purity levels of the mineral products has been strongly opposed by the mining companies because they face difficulties in achieving the levels through their existing processing facilities.

Miners feel that building smelters and refineries will be too expensive and will not be economically viable for their businesses, leading to the small number development projects of facilities that have been completed in the five years since the Mining Law was passed.

On the other side, economic pressures such as the country’s widening current account deficit due to weak exports and possible massive layoffs as a result of the export ban have forced the government to seek ways to provide a transition period for miners to fully comply with the law.

Industry Minister MS Hidayat, who also attended the meeting, said the government would not change the law as the new policy would only regulate the minimum purity level of mineral products that could be exported.

Since Friday last week, the Energy and Mineral Resources’ directorate general of mineral and coal has met experts and mining companies to decide the minimum purity level of each mineral that could potentially be exported, and to ensure the mineral products that will be shipped overseas have been partly processed. 

In the last round of talks on Wednesday, the directorate, experts and business players agreed that the minimum processing and refinery level of minerals would be revised down, including the most controversial mineral; copper concentrate.

Copper concentrate can continue to be sold overseas if its copper level in concentrate reaches 15 percent, according to PT Freeport Indonesia president director Rozik Soetjipto, who attended the meeting. Under the current regulation, copper ore must be processed and refined into copper cathode, which has a 99.9 percent copper content. 

Freeport Indonesia’s copper concentrate is about 27 to 30 percent copper, according to its website. Meanwhile, PT Newmont Nusa Tenggara has about 22 percent.

Mineral and coal director general R. Sukhyar said the export of 15 percent copper concentrate would only be allowed until 2017.

“In 2017, all minerals to be exported must be fully refined,” he said.

Although being flexible in relation to copper concentrate, the directorate general was firm regarding other minerals, such as nickel pig iron and bauxite.

Industry players proposed to set a 1.6 percent content level in nickel pig iron, which was rejected by the directorate general, which set it at 4 percent. 

Industry players also proposed that bauxite with 35 to 45 percent of aluminum content could be exported, which was also rejected. Under the current regulation, bauxite cannot be exported except if processed into alumina.

 


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