By Dow Jones Business News,
January 13, 2014, 08:23:00 AM EDT
By Farida Husna and Ben Otto
JAKARTA--Indonesia clarified its controversial mineral export ban Monday, closing the door on the export of ores
but allowing the export of six forms of concentrate that will permit some of the country's biggest foreign miners to
Speaking a day after the export ban went into effect without written guidelines, Finance Minister Chatib Basri said
miners in Southeast Asian's largest economy can pay special taxes to be able to export copper, iron ore, manganese,
lead, zinc and ilmenite for the next three years as long as they meet minimum purity levels.
That means that two of the largest foreign miners in Indonesia--Arizona-based Freeport-McMoRan Copper & Gold Inc.
and Colorado-based Newmont Mining Corp.--can continue to export from their huge copper mines in eastern Indonesia,
albeit with a 20% tax.
Separately, Energy Minister Jero Wacik said the export of mineral ores, including nickel and bauxite, two of the
country's most important ore exports, is off limits, contradicting a statement over the weekend that suggested
exceptions would be made for miners with firm plans to begin domestic refining in the coming years.
Three-month nickel rose 1.3% in midday trade on the London Metal Exchange, with analysts citing the Indonesian ban.
Few of Indonesia's miners process their minerals domestically, which has long been a source of concern in the
government as it tries to upgrade its value chain across sectors.
In 2009, Indonesia introduced a law calling on miners to process their minerals domestically by 2014 in a bid to
add value to one of the resource-rich nation's most important sectors. But confusion over the law and a dip in commodity
prices since then has meant few miners have invested in refining plants, leaving them unable to process all the minerals
they currently produce.
The turgid rollout of the law--with full details yet to emerge even after the law went into effect--has left many
in the sector uncertain of the final rules.
"It's confusing," said Faisal Emzita, executive director of the Indonesia Nickel Association. "This is playing
around with really sensitive issues."
Bill Sullivan, a leading legal adviser to major mining companies in Indonesia, said the move appeared aimed at
pushing miners to build smelters. For the past year, the energy ministry has touted the pending construction of a number
of smelters by major miners, but few if any will come online this year.
It appears "the government has decided that no one is actually going to start building smelters unless and until
the export ban is firmly in place," Mr. Sullivan said.
R. Sukhyar, the director general of coal and minerals at the energy ministry, told The Wall Street Journal that
major guidelines were up in the air just hours before the law took effect this weekend.
"There had been an intention to allow" companies to continue exporting ores if they had firm plans to refine
minerals, "to give some reprieve to small miners," he said. Indonesia is the largest exporter of nickel ore and a large
exporter of other ores such as bauxite, with the industries employing thousands across the country.
"But during the final cabinet meeting" on Saturday night, "it was decided that we had to follow the law that the
export of raw minerals is not allowed," Mr. Sukhyar said.
Mr. Basri, the finance minister, told reporters that the government will permit copper concentrate exports with a
purity level of at least 15%, in addition to iron ore (62%), manganese (49%), lead (57%), zinc (52%), and ilmenite (56%
Ore refers to minerals in their rawest form, as they're dug from the earth. Concentrates separate out some of the
rock that has no value, and still need to be heavily processed to yield metals. Freeport says the purity level of its
copper concentrate is above 20%.
The six concentrate exports will be subject to a 20% tax that will increase to 60% in the second half of 2016 as
part of the effort to get miners to fully process their products in the country by 2017.
(END) Dow Jones Newswires
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