(Adds intent of decree in third paragraph.)
Feb. 10 (Bloomberg) -- Indonesia will oblige mining companies to process metal ores locally from 2014, including copper, iron ore, nickel and bauxite, according to a ministerial decree that confirms a timetable in the nation’s 2009 mining law.
The planned change will boost state revenues, ensure supplies of processed metals for local industry and encourage investment in processing plants, according the decree, which was posted yesterday on the website of the Ministry of Energy and Mineral Resources. The decree was signed by the Energy and Mineral Resources Minister Jero Wacik on Feb. 6
The law is aimed at boosting the value of output from mines, as well as limiting environmental damage in Southeast Asia’s biggest economy. The regulation will bar companies with existing operations such as Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. from shipping ore overseas, forcing them to build smelting plants, or sell production to local processors.
“We all support the idea of the regulation, so we’re not only known as raw-material exporters, but can also be known as producers of high-value metals,” Syahrir Abubakar, executive director at the Indonesian Mining Association, said from Bandung, West Java. “Unfortunately not all companies are ready to comply with the regulations because investing in processing plants needs a lot of money and it takes time to build the plants.”
Freeport runs the Grasberg mine in Indonesia’s Papua province, which contains the world’s largest recoverable copper reserves and the largest single gold reserve, while Newmont extracts copper and gold from the Batu Hijau mine in Sumbawa.
Rubi Purnomo, a Jakarta-based spokesman for Newmont’s local unit, declined to comment on the issue, referring questions to association. Ramdani Sirait, a Jakarta-based spokesman at PT Freeport Indonesia, didn’t answer a phone call seeking comment.
The government will allow the export of copper cathode of 99.9 percent purity, according to the decree, which also stated that bauxite must be processed into smelter- or chemical-grade alumina before shipment. Nickel exports will be allowed in processed metal, such as ferronickel, while iron ore must be processed into so-called sponge iron with a minimum purity of 80 percent, or 88 percent alloy, according to the decree.
--Editors: Jake Lloyd-Smith, Thomas Kutty Abraham
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