Indonesian govt must offer incentives to build smelters-PT Indosmelt – by Michael Taylor and Wilda Asmarini (Reuters India – February 4, 2014)

JAKARTA, Feb 4 (Reuters) – Indonesia’s government must provide tax holidays and other financial incentives to convince companies to invest hundreds of millions of dollars to build copper smelters amid weak global prices, said the head of smelting firm PT Indosmelt.

President Susilo Bambang Yudhoyono last month imposed new mining policies, including a controversial mineral ore export ban and progressive export taxes, aimed at forcing miners to build smelters and process their raw materials in Indonesia.

The policies have forced U.S. miners Freeport-McMoRan Copper & Gold and Newmont Mining Corp, which together produce 97 percent of Indonesia’s copper, to halt all exports. The two firms have yet to commit to building smelters, saying it was not economically viable to make such large investments.

“The margins for smelters are small, very small,” Natsir Mansyur, president director of privately owned and unlisted PT Indosmelt told Reuters. “There must be incentives from the government. To build (a smelter), this business should be protected by the government.”

In mid-2012, government officials said they planned to offer financial incentives to help firms build smelters to comply with the new mining regulations, although the details have yet to be announced and talks are still ongoing.

Indosmelt is planning to start next month construction of a 700,000-tonnes capacity copper smelter, with production due to start in 2017 or 2018. Mansyur did not say whether PT Indosmelt was receiving any government incentives.

A consortium of local and foreign banks would finance 70 percent of the $1.5 billion needed for PT Indosmelt’s South Sulawesi copper smelter, said Mansyur, who is also an official at the influential Indonesia Chamber of Commerce and Industry.

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