Indonesia Ban on Unprocessed-Metal Exports to Proceed as Planned

By Yoga Rusmana and Fitri Wulandari - May 3, 2012
Bloomberg
Indonesia will proceed with a ban on exports of raw minerals, with some exemptions for miners that plan to build local processing facilities, and will publish details of the rule May 6.

“Miners will still be allowed to export after meeting some requirements, including obtaining permits, Edi Prasodjo, a director of coal at the Energy and Mineral Resources Ministry, said at a conference in Jakarta today. “The IUP must be clean and clear, paying taxes and royalties,” Prasodjo said, referring to a mining business license by its Indonesian initials.

The largest nickel-ore and bauxite supplier to China announced the prohibition in February, two years ahead of schedule. The new rules apply to holders of mining business licenses issued after 2009. Companies with a so-called contract of work, including Phoenix-based Freeport-McMoRan Copper & Gold Inc. (FCX) and Newmont Mining Corp. (NEM), will be allowed to ship ores until 2014.

The government will order miners exempted from the ban to sign a letter of commitment that they will stop all ore shipments by 2014, Thamrin Sihite, director general of minerals and coal at the energy ministry, said last month. The exporters must also obtain an export permit from the Trade Ministry, said Deddy Saleh, director general of foreign trade at the ministry.

Indonesia may choose to gradually tighten supplies by using taxation instead of continuing with the ban, Demian Reed, general manager commercial for bauxite and alumina at Rio Tinto Alcan, said April 25.

Coal Exports

The government has no plans to apply a coal-export tax so far because it hasn’t formally discussed such a tax with all stakeholders, Prasodjo said today.

“The government wants to focus more on how to control coal production,” he said without elaborating.

The Indonesia Mining Association estimated in March that the ban will cut nickel-ore and bauxite exports by as much as 75 percent this year. Indonesia shipped 33 million metric tons of nickel ore and 40 million tons of bauxite last year, according to Syahrir Abubakar, the group’s executive director.

The curbs, aimed at lifting the value of shipments and boosting local smelting capacity, apply to exports of raw metals including iron ore, gold, and silver, and bring them in line with the rules that have applied to tin since 2002, with only refined exports permitted. Indonesia is the world’s biggest shipper of tin, used in packaging and as solder.

Freeport runs the Grasberg mine in Papua Province, and Newmont operates the Batu Hijau copper mine on Sumbawa Island. Grasberg contains the world’s largest recoverable copper reserves, according to Freeport.