Indonesia Eases Export Ban on Nickel Ore, Bauxite


JANUARY 12, 2017

Jakarta. Indonesia introduced new rules on Thursday (12/1) that will allow exports of nickel ore and bauxite and concentrates of other minerals under certain conditions, in a sweeping policy shift from the key global supplier.

The broad changes cover areas including permit extensions, which can now be applied for up to five years in advance of expiry, and rules on divestment.

The changes also require nickel and bauxite miners to dedicate at least 30 percent of their smelter capacity to process low-grade ore, defined as below 1.7 percent nickel or below 42 percent aluminium.

However, the remaining low-grade ore can potentially be exported, Coal and Minerals Director General Bambang Gatot told reporters.

"Where, considering their installed (smelter) capacity, they can't absorb production, (ore) will be allowed to be sold overseas," he said.

The policy backflip was welcomed by state-controlled PT Aneka Tambang Tbk, whose revenues were hit hard after Indonesia banned nickel ore exports in 2014.

"Regional economies will grow, (and) mining areas that died because of the export ban can grow again," Antam CEO Tedy Badrujaman told Reuters on Thursday.

But nickel prices in London fell as much as 3 percent on the news, and for many investors in Indonesia's budding nickel smelter industry, which was supported by the ore export ban, the new rules are a disappointment.

Jonatan Handojo, executive director of the Processing and Smelting Companies Association (AP3I), told Reuters the new policy "damages Indonesia's image throughout the world and makes us look like our laws and regulations can be changed just like that."

"The Chinese companies will be most unhappy because they have invested something like $15 billion in developing smelters that are already in operation," Handojo said, adding the change could damage Indonesia's relations with China.

The new rules are a mixed bag for U.S. mining giant Freeport-McMoRan Inc, which now has a window to continue copper concentrate exports, but it will also have to divest up to 51 percent of its Indonesian unit from 30 percent under current rules. So far it has divested only 9.36 percent.

Freeport's Grasberg operation in Indonesia currently exports around two-thirds of its output as copper concentrate.

Under the new rules, Freeport must first switch over from its current contract of work (COW) to a special mining licence in order to clinch a new export permit, a process mining minister Ignasius Jonan said could be done in as little as two weeks.

Freeport's exports from Indonesia were held up for more than six months in 2014 in a fractious export tax dispute connected to the country's mining rules, costing Southeast Asia's top economy more than $1 billion and putting thousands of jobs at risk. A spokesman for Freeport Indonesia could not be reached for comment.