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 continue operations.
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.