Linda Yulisman, The Jakarta Post, Jakarta | Headlines | Wed, December 11 2013, 10:58 AM
The government is seeking a legal avenue to sidestep the ban on raw ore exports, which will go into effect early next year, after the House of Representatives recently rejected a proposal to exempt certain mining companies from the rule.
The Trade Ministry’s director general for foreign trade, Bachrul Chairi, said Tuesday that the government was considering setting a regulation on the minimum purity threshold for processed ore produced by local mining companies.
“We are now discussing the possibility. Setting [a purity level] will likely become the solution,” Bachrul told reporters at this office. By fixing a minimum purity threshold, certain mining companies that already partially processed their ores could still be allowed to export.
Indonesian Mining Association (IMA) deputy chairman Tony Wenas said revising the threshold could be a way to get around the law. “The current purity regulation creates a gap between the minimum processing limit for copper [99.9 percent] and nickel pig iron [6 percent],” he said as quoted by Reuters.
Earlier on Monday, Coordinating Economic Minister Hatta Rajasa said that the government was still seeking a way to allow mining companies that have concrete plans to build smelters to still be able to export their ore.
“We are trying to find a way, to find a solution. But that doesn’t mean we are going to break the law […] we are going to talk again to the House,” Hatta told Reuters.
Energy and Mineral Resources Minister Jero Wacik went to the House last week to propose that companies that had shown a commitment to building smelters ought to be exempted from the upcoming export ban on raw ore.
The proposal was rejected, although most of the country’s miners would be unable to comply with the law, which only allows the export of ore that has first been processed in domestic smelters beginning Jan. 12.
House members said that mining companies had already been given more than four years to comply with the requirement.
If implemented the export ban would shut down most of the country’s mining operations, as only a few miners operate their own smelters.
In addition to massive layoffs in the mining sector, the ban would also cause the country to miss out on revenue from ore exports, which were US$5 billion this year, in addition to taxes and royalties from mining.
Mining giant PT Freeport Indonesia would have to cut output by 30 to 40 percent if the ban was imposed, the company’s president director Rozik B. Soetjipto told Reuters last week. He said that the company would need to lay off workers if it could not export its copper concentrates.
At present, the miner processes part of its concentrate in a smelter in Gresik, East Java.
Freeport, which employs about 30,000 workers at its copper and gold mine in Papua, has agreed to process the larger part of its concentrate in two other smelters, which are now under feasibility studies.
Newmont Nusa Tenggara (NNT), an Indonesian subsidiary of the US-based Newmont Corp., has also said that it would have to halt mining operations if the ban was imposed.
According to the government, the ban would cause ore exports to drop in the short term, but in 2016 exports would nearly double to more than $9 billion, due to value added from processing.
Bambang Wuryanto, a lawmaker on House Commission VII overseeing mining and energy, maintained that the mineral ore export ban should be implemented next month as planned. However, he said that the details of implementation were left up to the government.
“It’s up to the government how it wants to implement the ban,” said Bambang, adding that a rule on purity limits could be accepted so long as there was still a process conducted locally to add value to the ore.
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