JAKARTA. The government is revising the regulation on the assessment of smelter development, connected to leniency in export permits, as part of its efforts to support mining firms mired by financial woes.
The Energy and Mineral Resources Ministry director for mineral at the mineral and coal directorate general, Mohammad Hidayat, said Friday that his office was evaluating a regulation on the requirements for selling processed and refined minerals.
"Several matters have to be adjusted to adapt to the current situation. This adjustment is not only meant for Freeport but also for numerous other companies that are having difficulty with smelter projects," Hidayat said, playing down suggestions that the move was related to ongoing negotiations between the Indonesian government and PT Freeport Indonesia following the latter’s export permit expiry late last month.
Mining firms around the world have been under pressure amid a prolonged slump in global commodity prices.
Hidayat said the regulation adjustment would likely cover new measurements in the assessment of smelter development and the withdrawal procedure for surety bonds.
Under current regulation, mining firms working on smelter projects have to deposit 5 percent of their total investment in local banks as collateral to ensure that they will continue the development. The surety bonds are a prerequisite for the firms to obtain permits to export semi-finished mineral products.
"We need to check further, to help them continue the project by allowing the companies to withdraw the fund in accordance with the progress of their smelters. We cannot hold these funds if operations are hindered due to a lack of funds," Hidayat said.
The smelter development is part of the government’s added-value minerals policy, mandated under the 2009 Mining Law.
The law obliges mining firms to have processed and refined minerals in domestic smelters by 2014. However, most firms have been reluctant to comply with the new obligation, saying such projects are not economically feasible.
Moves to work on the projects were only seen in late 2013 after the government said it would officially ban raw mineral exports in early 2014 as a consequence of the value-added policy. Meanwhile, a relaxation was granted to allow those companies producing semi-finished minerals, such as copper concentrate, to continue exporting product until 2017, so long as a commitment to smelter projects was confirmed.
Reportedly, small-sized smelters have been progressing at a snail’s pace with only six new smelters beginning operations last year. According to figures from the mineral and coal office, three nickel smelters, one bauxite smelter and three Lead-zinc smelters are scheduled to be operational this year. However, no significant progress has been reported with regard to other smelters, those refining valuable minerals, particularly copper, as in the case of PT Freeport Indonesia.
Following Freeport Indonesia’s export permit expiry, the Energy and Mineral Resources Ministry declined to grant an extension recommendation as the company failed to show significant development with its smelter project in Gresik, East Java The ministry also requested the firm increase its deposit to USS53O million due to the commitment delays.
Hidayat admitted that the requirements for PT Freeport Indonesia would also be reviewed. He did not provide further details regarding the review.
Energy and Mineral Resources Minister Sudirman Said revealed that the company had requested some discounts to the required deposit.
"They made the request because they are in financial trouble," he said.
Freeport Indonesia is a major contributor to its 90.64 percent owner, Freeport McMoRan Copper and Gold Inc., who announced poor performance last week. Moody’s Investors Service has cut the company’s credit rating to junk status. Richard Adkerson, chief executive officer of Freeport McMoRan Copper and Gold Inc., said, as quoted by Bloomberg, that the company had considered selling its mining assets either wholly or partially.
Source : The Jakarta Post, February 06, 2016