As miners strike back, minister softens

Amahl S. Azwar, The Jakarta Post, Jakarta | Headlines | Thu, April 11 2013, 9:16 AM

Major mining companies have begun to show their teeth to the government amid the latter’s determination to ban unprocessed ore exports as well as obliging miners to build local smelters by 2014.

The 2009 Mining Law stipulates a ban on mining firms exporting unprocessed ore from 2014 and requires the firms to build local smelters or to cooperate with smelting companies to process the ore.

Indonesian Mining Association (IMA) chairman Martiono Hadianto said on Wednesday that two giants, Freeport Indonesia and Newmont Nusa Tenggara, might even have to lay off workers should the government decline to amend the law.

“It means at least 8,000 staff at Newmont as well as 25,000 workers at Freeport may have to lose their jobs,” said Martiono, who is also Newmont’s president director.

The association expected a government reply by June or some companies might have to shut down operations in 2014, Martiono added. Newmont operates the Batu Hijau gold and copper mine in West
Sumbawa, West Nusa Tenggara (NTB).

Speaking to officials of the Energy and Mineral Resources Ministry in a two-day symposium in Jakarta, Martiono said the association supported the development of smelting plants for iron ore, bauxite and nickel. “Major investment as well as a reliable and cheap power supply will be required to support bauxite and nickel smelters but basically they are feasible,” he said.

However, said Martiono, the government could not expect companies to build smelters for zinc and lead as the proven reserves for the two types of minerals were insufficient to supply smelting plants.

In addition, the association said it would be uneconomical to build new copper smelting plants as the existing plant had the technology to achieve 93 percent processed copper purity. To achieve 100 percent purity, as the government sought, an investment of US$1 billion would be required.

The association cited a report from the Bandung Institute of Technology’s Industrial and Research Affiliation Institution (LAPI-ITB) saying that building a new copper smelter would increase the processing costs from around 16 US cents per pound to 35 US cents. “In conclusion, it is uneconomical to build copper smelters, and insisting on the deadline will mean layoffs,” he said.

Freeport Indonesia technical affairs director Rudy Seba said that current regulations would make it impossible for Freeport to operate and, thus, would mean layoffs.

To avoid over-exploitation of the nation’s mineral resources in the run-up to the ban’s implementation, the government last year issued tougher requirements on the export of 65 types of raw minerals — including a 20 percent export tax on minerals.

Energy and Mineral Resources Minister Jero Wacik said the government might revise the regulations as not all of the mining companies in Indonesia were ready to build smelters in 2014. “Anything can be changed, including regulations. The only thing that one cannot change is holy writ,” said the minister.

“Of course, we cannot simply ban them from exports just because they have not finished building smelters in 2014. And, of course, there will be incentives for those who have already begun construction.”

Jero’s subordinate, minerals and coal director general Thamrin Sihite, however, was adamant that the miners could not simply let their workers go, saying that banning unprocessed mineral exports in 2014 was “in the Constitution”.


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