Update COVID-19 in Indonesia: 24,538 confirmed infections, 1,496 deaths (28 May 2020)
29 May 2020 (closed)
USD/IDR (14,502) -231.01 -1.57%
EUR/IDR (16,128) -204.62 -1.25%
Jakarta Composite Index (4,753.61) +37.43 +0.79%
After the word spread that the government of Indonesia will reevaluate its export ban on mineral ore, Indonesia's Ministry of Energy and Mineral Resources announced it will soon open room for exports of iron sand (a type of sand with heavy concentrations of iron). Bambang Gatot, Director General for Coal and Minerals at the Energy Ministry, said exporters will have to pay export duties but declined to inform about the exact amount. He did say, however, that the mechanism will be similar to the export duty mechanism used for other concentrate exports (including copper) in the "post-New Mining Law era".
Ministry of Finance Regulation No 153/PMK.011/2014 (Finance Ministry Regulation) sets an export duty on copper, iron, manganese, zinc, titanium, and lead concentrates in the range of 0 and 7.5 percent. The exact percentage depends on exporters' progress with processing facility (smelter) development. In accordance with the 2009 Mining Law the country's miners are required to build domestic processing facilities as the government seeks to ban exports of mineral ore in order to boost the development of domestic processing facilities hence boosting exports of mining products that are higher up in the value chain. This highly controversial mineral ore export ban - which conflicts with existing Contracts of Work - was planned to be implemented in full force in January 2014 but its implementation was delayed as Indonesia still lacks a sufficient amount of processing facilities. This implied that full implementation would cause billions of US dollars in lost revenue.
The aforementioned Finance Ministry Regulation provides room for the resumption of certain concentrate exports and yet discourages it at the same time. When miners have invested up to 7.5 percent of the total estimated costs for smelter development, then they need to pay a 7.5 percent export duty. When development of the smelter has been completed for 7.5 - 30 percent, then the export duties decline to 5 percent. Lastly, when the smelter has been completed for at least 30 percent, then export duties are scrapped altogether (examples of companies that are affected by these rules are Freeport Indonesia and Newmont Nusa Tenggara for their copper concentrate exports).
However, Bambang Gatot stated that - although the export duty mechanism for iron sand will be similar to the mechanism applied to specific concentrates mentioned in the Finance Ministry Regulation - the exact figures will most likely differ.
Companies that are expected to be positively affected by the resumption of iron sand exports (which had ceased in 2014) are Sumber Baja Prima, Megatop Inti Selaras, Adiguna Usaha Mandiri, Malta, Bejana Inti Alam, and Jogja Magasa Mining.