House Proposes New Smelter Requirement in Latest Regulatory Twist


JUNE 02, 2015

Jakarta. Companies thinking of investing in smelters in Indonesia to comply with local mineral export regulations may have to reconsider their plans in light of a new bill set for deliberation by the House of Representatives.

The bill, an amendment to the existing Mineral Resources and Coal Law, will require smelters to be built in the vicinity of the mines from which the ores are extracted, according to Kurtubi, a legislator from the National Democrat Party (NasDem).

“In the bill that we’ve proposed, we want to make it mandatory for the smelters to be in the same location as the mine, not like now, where the mine and the smelter are in separate locations,” Kurtubi, a member of the House of Representatives’ oversight commission for mining and energy, said in Jakarta on Monday.

He said the idea was to boost economic development in mining regions and decentralize smelting operations from Java.

“Mining operations that integrate the upstream and downstream branches will benefit the mining companies themselves,” Kurtubi said. “They won’t have to spend money transporting their ores to smelting sites on other islands.”

He added the bill was expected to be included in the docket of priority legislation for this year.

The bill, if it goes through, would seriously derail ongoing plans by several stakeholders to build costly smelters in the country to comply with a partial ban on the export of unprocessed mineral ores.

Freeport Indonesia, which operates the world’s biggest gold and copper mine in Papua province, has already committed to investing $2 billion in a new smelter in East Java, in a joint venture with Newmont Nusa Tenggara, another copper-mining giant.

Both companies say it is unfeasible to build smelters near their mining sites, which are located in remote regions with minimal infrastructure, including the huge amounts of electricity needed to run a smelter.

Any new requirement to build smelters closer to mining sites would only add to the already tangled web of regulations for foreign investors seeking to do business in the country.