Hence, in 2009, the government had taken a decision to ban the export of raw minerals and made it mandatory for mining companies to build smelters. It decided to ban the export of unprocessed mineral ores as of January 2004 in a bid to encourage miners to process ore domestically.
However, after protest from the industry, the implementation of the ban was pushed back to January 11, 2017, to give an opportunity to mining companies to build smelters.
The government has currently issued an ultimatum to miners who have yet to build smelters. Energy and Mineral Resources (ESDM) Minister Ignasius Jonan affirmed that he will revoke the concentrate export permits of companies that delayed the construction of their smelters.
"They have to build smelters if they want to export concentrates. They have to at least promise to build the smelters in five years, with a stamped statement, or else I will revoke their permits," Jonan stated at the ESDM ministry building in Jakarta on Thursday (January 12).
According to the minister, if in the span of five years, the construction of the smelters is not yet completed, the government will not extend their concentrate export licenses.
Besides this, the recent issuance of Government Regulation (PP) No. 1 of 2017 necessitates mining companies to change their contract of work (CoW) status to a special mining business license (IUPK). This applies to mining firms willing to export concentrates.
"The change of status to IUPK will not, however, guarantee that a mining firm can have its permit extended if its smelter development had not made progress. The IUPK and permit are two different things. They both have to be applied," Jonan noted.
The government has also set a condition on export fees of about 10 percent on concentrate exports based on the physical progress of the smelters development.
The ministers policy is related to the issuance of PP No. 1 of 2017 on the fourth amendment to PP No. 23 of 2010 on the Implementation of Mineral and Coal Mining Activities.
The government is introducing the policy in a bid to develop smelters and encourage the processing and extraction of mineral ores to increase the added value of the countrys mineral resources. It is also intended to offer maximal benefits to the state and to offer legal certainty to businesses.
In the meantime, PT Freeport Indonesia and PT Amman Mineral Nusa Tenggara are optimistic that the change in the company status from CoW to IUPK will not hinder their operations.
Mining companies operating under the CoW are currently required to change their status to IUPK after the issuance of PP No. 1 of 2017.
The two mining companies continue to operate under the CoW. They are still evaluating PP No.1 of 2017 that allows IUPK companies to export mineral ores. Miners currently having a CoW must obtain the IUPK to continue exporting concentrates.
"What we want is that it would not disturb the companys operations. This will depend on our talks with the government because it would affect us in many ways," spokesman of Freeport Indonesia Riza Pratama remarked at the office of the Directorate General of Mineral and Coal of the ESDM in Jakarta on Friday (January 13).
PT Freeport Indonesia, PT Amman Mineral Nusa Tenggara, and Director General of Mineral and Coal Bambang Gatot Ariyono discussed the new policy that had been signed by President Joko Widodo (Jokowi).
Pratama noted that with the issuance of the new regulation, the company is no longer allowed to export concentrates. Freeport has also halted its exports for six months due to the constraint of the concentrate export license. He could not as yet predict when it would start exporting concentrates again.
He expressed hope that the ban on copper exports would not last too long, as it could have an impact on the states revenues. Nonetheless, Freeport remains committed to developing a mineral smelter.
"We are committed to developing a smelter, but we are still waiting for the contract, as developing a smelter will require contract certainties," Pratama emphasized.
On the same occasion, President Director of PT Amman Mineral Nusa Tenggara Rachmat Makkasau said his company was also still evaluating the new regulation, particularly with regard to the companys obligations to the government.
Makkasau noted that currently, his companys operational activities were still running.
"Our operations remain normal. It is our focus to ensure that our operations will all run well," he added.
The ESDM ministry has issued two ministerial regulations on mineral processing and extraction in Indonesia and on requirements for the issuance of a recommendation for exporting processed and extracted minerals.
Jonan said ESDM Ministers Regulation No. 5 of 2017 and No. 6 of 2017 had been issued.
Ministers Regulation No. 5 of 2017 regulates the added value of mineral ores processed and extracted at home, while Ministers Regulation No. 6 of 2017 concerns procedures and recommendations for exporting minerals after processing and extraction.