[Indonesian] Ore Export Ban Is Definitive, Official Says – by Muhammad Al Azhari (Jakarta Globe – January 2, 2014)


Indonesia will be consistent in banning mineral-ore exports this year, as mandated by the 2009 Mining Law, and the government regulation would set processing and purification requirements before companies can export, a senior government official said.

R. Sukhyar, the newly appointed director general of coal and mineral resources at the Energy and Mineral Resources Ministry talked with the Jakarta Globe on Tuesday, almost two weeks before the Jan. 12 deadline, to clarify the government’s stance about the mineral-ore export ban.

Reports last month said the government would set exemptions, but that is not the case, according to Sukhyar. “The law says mineral ore mined from Indonesian soil must be processed [domestically] and be purified. That’s clear, that means no more mineral-ore exports. That’s non-negotiable,” said Sukhyar, a veteran bureaucrat, who officially started his new position on Dec. 20.

The government regulation, he said, will regulate technicalities about the smelting and purification level for metals including copper, nickel, bauxite, tin, iron ore, manganese, gold, copper. It will also regulate the adding of value to non-metals, such as limestone, quartz and marble, before they can be exported.

Failure to comply would mean hundreds of registered mining companies could lose their licenses to operate.

Sukhyar, who started his career at the Energy Ministry in 1980 in the volcanology department, said even though the end result of the policy meant lower production, he said “it is a bitter pill that has to be swallowed.”

“Well, the logic is if they cannot export the mineral ore, why bother mining, right? I assure you, once the smelters are there the benefit in the future is bigger,” said Sukhyar, who got his PhD from Monash University in Australia in 1989.

Lower revenue in the short term

He said Indonesia’s foreign exchange revenue from ore exports may decline by $4 billion this year, and by $2.5 billion in 2015. But in 2017, such revenue from processed minerals such as copper cathode and aluminum may double from around the $4.9 billion estimated for this year.

He confirmed that construction has started on 28 smelters, and would most likely take about three years to complete.

When asked what would happen to contract of works holders, such as Freeport Indonesia and Newmont Nusa Tenggara, Sukhyar said that there is “no need for many excuses.

“Article No. 170 [of the 2009 Mining Law] is clear. They must purify the minerals. That means processing the ore into metal, not concentrate.”

Two articles in the law designed to change the landscape of the mineral sector’s activities in Indonesia were Article 103 and Article 170.

In Article 103, holders of mining business licenses (IUP) and a production operation mining business licenses (IUPK Operasi Produksi) must process and purify minerals mined in Indonesia. Article 170 states that contract of works holders must purify the minerals at the latest five years from the ratification of the law.

Currently, Freeport Indonesia, the local unit of US copper giant Freeport-McMoRan Copper & Gold, processes only about 40 percent of its ore mined in Indonesia at a smelter in Gresik, East Java, and that is the only copper smelter in the country.

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