* Companies may get up to 5 years to complete smelters
* Govt aiming to be "as fair as possible" -minister
* Smelter industry rejects proposal to allow nickel ore
(Recasts, adds details on changing smelter policy)
By Fergus Jensen and Wilda Asmarini
JAKARTA, Oct 4 Indonesia is finalising an
overhaul of its mining rules that could give companies up to
five more years to build smelters, and reopen exports of nickel
ore banned since 2014, the country's mining minister said on
The proposed changes provide a way around a 2017 deadline
for full domestic processing of mineral ores, potentially
pushing completion of that aim to 2022, but also possibly
undermining investor confidence.
"We will provide an opportunity to companies building
smelters, in the form of a relaxation ... in accordance with
their smelter development progress," Mining Minister Luhut
Miners that fail to build smelters within five years could
have their mining permits revoked, Pandjaitan said.
Present rules would stop miners of copper, zinc, lead,
manganese and iron from exporting concentrates after January
2017, after which only shipments of processed metals will be
The proposed change could be a breakthrough for miners such
as U.S. giant Freeport-McMoRan Inc, for whom it would
avert a stoppage of copper concentrate shipments from the giant
Grasberg mine in Papua in far eastern Indonesia.
A Jakarta-based spokesman for Freeport did not immediately
respond to requests for comment on the matter, but Indonesia's
largest copper miner has previously said it was confident the
government will not push ahead with the 2017 deadline, as the
move could harm the economy.
NICKEL ORE POLICY
The government is also looking to possibly change rules on
nickel ore with a 1.8 percent metal content, "because no one can
process it domestically. Perhaps we will consider exporting it,"
Nickel companies have said they fear the rule changes could
weaken metal prices, undermine confidence in the newly budding
smelting industry and risk up to $12 billion in investments.
The Philippines took the crown as the world's top nickel ore
exporter after Indonesia banned nickel ore shipments, and now
accounts for around one-quarter of the world's mined nickel
supply, most of which is shipped to China.
But Indonesia has found compensation in shipping pig iron to
China, India and other buyers, and this industry now worries
that resuming ore exports could undermine the prices for such
semi-finished and refined metals.
"Actually no one supports there being ore (exports) any
more," Jonatan Handojo, executive director of Indonesia's main
smelter industry association, told Reuters.
Overturning the ban would go against the wishes of most
participants in Indonesia's nickel industry, Handojo said.
He dismissed a "handful" of companies, such as Indonesian
state miner Aneka Tambang, which hope that Indonesia
will again open up nickel ore exports to prop up income and
support financing for smelter investments.
As part of the overhaul, the finance ministry is working on
a progressive export mineral export tax, to be imposed in stages
according to how far companies have advanced with their smelter
development, Pandjaitan said.
Further details of this and the mining overhaul are expected
within weeks, Pandjaitan said.
"There is no way we can satisfy everyone, but we are trying
to be as fair as possible, and to act in the interests of the
government, the people of Indonesia and investors in that
sector," he said.
Indonesia's growth cooled to its slowest in six years in
2015, partly as a result of weaker returns from commodities, and
the government has been rolling out new measures this year to
re-energise the economy and boost its revenues.
Nickel prices hit a seven-week high of $10,900 a
tonne on the London Metal Exchange last week, after the
Philippines intensified its environmental crackdown on nickel
(Reporting by Wilda Asmarini; Writing by Fergus Jensen; Editing
by Tom Hogue)