Indonesia ore export ban will kill off domestic mining - industry


JAKARTA, Dec 6 (Reuters) - Indonesia's mining industry willbe killed off by a planned ban on unprocessed mineral exports, adomestic miners' association said, accusing the government offavoring international firms that can more easily adapt to thenew rules.

The ban by Indonesia, the world's top exporter of nickelore, coal and refined tin and a major supplier of bauxite, wouldforce miners to build smelters or sell ore to companies withsmelters, reducing profit margins for smaller operators.

"The national mining industry will die before it develops,"the Indonesian Mineral Entrepreneurs Association said in astatement, arguing that the ban favours firms such as FreeportMcMoran Copper & Gold Inc and Newmont Mining Corp that have been operating in Indonesia for decades.

The new rules, due to take effect from Jan. 12, are part ofefforts by Indonesia to win a greater share of its resourcewealth, but opposition has been mounting amid depressed metalprices and a widening trade deficit.

Mining contributes about 12 percent of gross domesticproduct (GDP) for Southeast Asia's largest economy.

Lawmakers on Thursday rejected a central government proposalto allow miners with serious smelter plans in place to get anexemption from the ban.

Regional governments also plan their own export rules, thatmay further complicate matters for miners.

Shipments of bauxite have risen sharply as buyers stockpilein preparation for the planned stoppage, while potential mininginvestors such as UC Rusal andGlencore-Xstrata Plc are watching for clues on how therule will be implemented.

The mineral entrepeneurs association said long-standinginternational miners would be able to build smelters, "afterlooting our natural resources and enjoying especially lowroyalties for decades."

They would also be able to buy ore cheaply from local minersthat couldn't afford to build smelters and other infrastructure.The local industry would be "killed", and only a handful ofminers would survive, it said.

Newmont declined to comment. A spokeswoman for Freeport wasnot immediately available.

Nomura has said the rule could cost Indonesia as much as$400 million a month in lost export revenue, which would have asubstantial impact on its $700-million-a-month trade deficit.

However, the government has said the impact of the oreexport ban would be "more or less neutral or relativelymanageable".

"Though unprocessed material exports will decrease, we havea number of policies that would be able to compensate," FinanceMinister Chatib Basri told reporters on Friday.

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