Government Regulations Aim to Add Value to Indonesia’s Mining Industry

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By: Winnindo R&D Team
Editor: Samuel Glickstein

The Indonesian government recently published its fourth revision of Regulation No. 23 2010, which governs the country’s mineral and coal mining sector.

The government also published two decrees for the Ministry of Energy and Mineral Resources to implement the regulation: Ministerial Decree No. 5 and Ministerial Decree No. 6. Ministerial Decree No. 5 concerns the increase of the added value of minerals for domestic processing and purification and Ministerial Decree No. 6 Year involves the export agreement.

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According to Ministerial Decree No. 5, holders of mining production and operation licenses, special mining production and operation licenses, as well as mining production and operation licenses that specialize in processing and purification are obligated to fulfill minimum processing and/or purification requirements. Companies may process and purify minerals individually or through joint ventures.

In addition, this decree stated that low-grade nickel that is less than 1.7 percent and low-grade bauxite that is less than 42 percent must be purified at a minimum of 30 percent of smelter capacity. If the domestic demand for low-grade nickel and low-grade bauxite is met, the unpurified surplus of minerals can be exported.

However, the work contract holder can only sell their purified products to foreign markets after they meet the minimum purification requirement. The government has provided an opportunity for work contract holders as well as holders of different types of mining production and operation licenses to sell their mineral concentrate overseas for the next five years. This period began on the date that the government issued both Ministerial Decrees.

The requirement to change from work contracts to special mining production and operation licenses commits each firm to build a smelter. Firms must also pay a maximum 10 percent in exit customs according to their progress in building smelters. Companies may only export their products after their export application is approved by the Directorate General on behalf of the Minister of Energy and Mineral Resources.

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Ministerial Decree No. 6 states that before acquiring an export permit, the holder of the mining production and operation license must first obtain approval from the Directorate General.

In order to obtain approval, the holder of the production and operation license must submit an export application to the Minister for Energy and Mineral Resources c.q. Directorate General of Mineral and Coal. Although these decrees have only recently been announced, they have the potential to contribute to the development of Indonesia’s mining industry.

 

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