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Indonesia's small miners feel betrayed by export ban; fear more layoffs, closures

By Fergus Jensen

DAMPALA, Indonesia, Jan 12 (Reuters) - Hundreds of small Indonesian mines, like nickel miner Mobi Jaya Persada, are preparing for the worst after the government imposed a controversial mineral export ban on Sunday that could force them to close down.

Mobi Jaya Presada, which contributes to Indonesia being the world's biggest exporter of nickel ore that is used in stainless steel production, has already laid off half of its 100 employees ahead of the ban coming into force.

"We've already started reducing the workforce and we're going to continue if the regulation stops ore exports," said Roy Kojongan, business development manager for the remote Mobi Jaya Persada, adding the company only had 44 employees left.

"It's not fair for the people of Indonesia."

Almost 30,000 mine workers have been laid off as mines cut back operations ahead of the long-expected ban, according to the Indonesian Mineral Entrepreneurs Association.

Mine lay offs have already sparked protests in Jakarta and thousands more could see the export ban become a hot political issue in 2014's legislative and presidential elections.

"We call on all mining workers to prepare to go on the streets and swarm the presidential palace if the government goes ahead with the implementation of the ban," said Juan Forti Silalahi of the National Mine Workers Union in a statement earlier on Saturday.

On Sunday, the export ban took effect requiring all mineral ore be processed domestically in an attempt to transform Southeast Asia's biggest economy from being simply a supplier of raw materials into a producer of finished goods.

But fearing the ban would significantly impact Indonesia's already slowing economy, President Susilo Bambang Yudhoyono signed last-minute regulations diluting the law to allow major miners, like U.S. giants Freeport-McMoRan Copper & Gold and Newmont Mining Corp, to continue exporting as usual.

That leaves the burden of the ban on hundreds of smaller, locally-owned operations that cannot afford hundreds of millions of dollars to build a smelter to comply with the law.

More than 100 junior mining companies, from privately held PT Harita Prima Abadi Mineral to Singapore's Ibris Nickel Pte Ltd, have reduced or shut down operations because of the uncertainty surrounding the mineral export ban.

"Why are they releasing Freeport and Newmont, but banning local companies?" questioned Erry Sofyan, director PT Harita Prima Abadi Mineral which mines bauxite, an ore used to make aluminium.

"We already stopped mining operations at the end of December. If we can't continue exporting bauxite, we will layoff 4,700 workers."


Despite knowing for more than five years that this ban was coming, companies have hesitated to invest in smelters and refining facilities due to the lack of infrastructure and power in remote areas where mines are often located.

Ample global smelting capacity and weak metal prices, also make new smelters less economically viable.

"We are not against the downstream processing policy, but with the assumption that the government would provide the infrastructure," said Kojongan, whose company has yet to make its first shipment but has already been approached from buyers in Australia, Canada and China.

Kojongan's firm, Mobi Jaya Persada, owns a small 34-hectare mining concession in Dampala in a distant part of Central Sulawesi, a hub of Indonesia's nickel mining industry that provides a lifeline for many local villages.

Its hauling road carves a steep and winding path into the densely forested hills behind Morowali's crystal blue coast, where wooden canoes have been used for fishing for centuries.

Silt from the mines is changing this and many fishermen complain that their catches have dropped sharply since mining permits were issued in 2009, the start of the nickel boom in the sprawling eastern Indonesian island of Sulawesi.

But the mines provide work for villagers and the significant impact the export ban threatens to have on the local communities in Sulawesi makes Rudi Chandra, a mining contractor for Mobi Jaya, hopeful Jakarta will eventually relent allow small miners to continue production.

"In 2012, when the first (mining) regulation was brought in we were all hurt -- toothaches, headaches and heartaches. Now if they implement this out we will be dead," Chandra said.

"There has to be a solution. It's just that we don't know what the solution will be yet."