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RESOURCE NATIONALISM: Indonesia will implement mineral ore export ban, taxes from May 6

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Indonesia is set to implement a mineral ore export ban and impose taxes starting May 6, a senior government official told Metal Bulletin.

“There is no change in our plan. All producers that have no processing plans will be banned from exporting [ore] from Sunday, May 6,” Dede I Suhendra, director of mineral, coal and geothermal resources in the energy and mineral resources ministry, said.

Producers that have submitted their processing plans and meet government criteria for value-added processing will be allowed to continue exporting.

“Producers that are allowed to continue exporting will also have to pay export taxes on ore shipment,” Suhendra said.

Suhendra declined to give details on the number of companies that will be allowed to continue exporting, or the amount of taxes that will need to be paid, ahead of the official announcement, expected Friday afternoon Jakarta time.

Sources believe that ore export taxes will be between 15% and 50%, depending on the minerals, which will likely result in higher prices as supply falls. 

Progressive taxes may also be introduced in 2013 and 2014.

The minerals affected by the ban are copper, lead, nickel, gold, silver, zinc, chromium, bauxite, manganese, molybdenum, platinum, antimony, iron ore and sand iron.

Some 50-80% of around 10,000 mining permit holders will have to cease production as a result of the ban, sources said.

There are only 42 mining contract holders in Indonesia, and they will face a mineral ore export ban only in 2014.

Intermediary solution for national benefit
Mining stakeholders mostly accept the government's decision to implement the ban.

“This is a breakthrough for the country. Instead of banning ore export completely, at least the government allows some producers to continue exporting,” Tony Wenas, deputy chairman of the Indonesian Mining Assn (IMA), said.

“This is an intermediary solution because enforcing a complete ban will kill the mining sector in the country,” he said.

The government’s decision is for the country’s long term benefit, Alwin Syah Loebis, president director of Aneka Tambang ¬ the country’s second largest nickel producer – said.

“The government wants a greater say, greater control for its mineral resources. I think the government is making this very clear,” Loebis said.

Allowing some producers to export will appease parties that fear the decision will result in investors pulling out of Indonesia, or hit the mining sector too hard.

“Surely there was a lot of negotiation going on among different government bodies, producers, or even foreign buyers, before the decision was taken,” Loebis said.

“I think this decision is quite fair. In the long term, producers that wish to operate in Indonesia have to think of value adding the country, instead of simply exporting the ores,” he said.

Loopholes
Other sources rang warnings of potential loopholes in the ban and taxes.

“It is still not clear what the government means by ‘processed ores’. Some minerals, such as nickel, can be processed, but to what level of purity?” Priyo Pribadi Soemarno, former executive chairman of the IMA, asked.

More clarity is necessary on how the taxes will be calculated.

“The government has not clearly spelled out how the taxes will be calculated. Will they be based on the ore shipment fob price? Or will they be based on the global market prices?” Soemarno said.

Plans to develop downstream processing also require the government to provide infrastructure to build smelters.

“If there are no roads, no power plants, how could investors build a smelter?” Soemarno said.

“The government should look into these potential problem areas, and perfect the regulation [otherwise] we can expect a lot of conflicts in the future,” he said.

Megawati Wijaya
megawati.wijaya@metalbulletinasia.com

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