Shares of Indonesian mining company Merdeka Copper Gold rose about 15 percent on its trading debut on Friday (19/06). The company, a subsidiary of Saratoga Capital, was the sixth company to conduct an initial public offering (IPO) on the Indonesia Stock Exchange (IDX) in 2015. Head of Finance and Corporate Secretary Ellie Turjandi said that Merdeka’s shares had been oversubscribed nearly 40 times during the public offering (11-15 June 2015), reflecting investors’ confidence even though the company has not yet begun production.

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Indonesian miners may be allowed to resume bauxite exports after a government official signalled that the Indonesian government is looking at relaxing its (raw) mineral export ban. This ban, implemented in January 2014, was introduced in an effort to boost domestic processing capacity, generate more revenue (by adding value to its mineral products) and enhance employment opportunities in Southeast Asia’s largest economy. However, amid the lack of domestic smelting capacity, the export ban has led to a plunge of exports.

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Bad news for Indonesian coal miners as the government of Indonesia plans to raise coal royalties in March 2015 in a bid to increase revenue from the natural resources sector. Apart from raising royalties, the government will also implement measures to enhance monitoring in the coal mining sector (as illegal coal shipments and tax avoidance are a major problem). The plan to nearly double coal royalties are particularly expected to impact negatively on smaller miners and new firms that focus on the production of low-quality coal.

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The Indonesian Ministry of Energy and Mineral Resources signaled that the government may (again) decide to postpone full implementation of its ban on exports of raw mineral ores and concentrates as the country still lacks sufficient smelting capacity to produce value-added mining products. Through this export ban, stipulated by the 2009 Mining Law, the Indonesian government aims to enhance revenue generation in the country’s natural resources sector by forcing miners to produce and export value-added products instead of raw materials.

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Indonesia’s Ministry of Energy and Mineral Resources may revoke the Mining Business Permit (Izin Usaha Pertambangan, or IUP) of 4,643 local mining companies at the end of January 2015 as these companies still lack the clean and clear certificate (CnC) from regional authorities. This CnC certificate indicates that the mining company has no outstanding royalty and other tax debts, fulfilled its exploration and environmental commitments, has no property delineation issues and obtained the necessary forestry permits.

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On 14 December 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as the central bank’s interest rate policy, an update on palm oil, the middle income trap, November car sales, the performance of the rupiah exchange rate, legal matters regarding mining, and more.

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Due to a strike at Freeport Indonesia’s Grasberg mine in Papua, the company’s copper production has fallen by about a third thus leading to speculation that global copper prices may increase after having fallen almost ten percent in 2014. About one thousand workers of Freeport Indonesia have been on strike since the second week of October after a fatal accident at the end of last month. The workers request the sacking of around 50 managers at the subsidiary of US-based Freeport-McMoRan Copper & Gold.

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Coal exports from Indonesia are expected to decline in the remainder of 2014 as the Indonesian government implemented a new licensing system for domestic coal miners - the ‘Listed Exporter’ status (Indonesian: Eksportir Terdaftar, ET) - per 1 October 2014 in an effort to optimize monitoring of the coal mining industry (illegal coal shipments from Indonesia form a structural problem). This new legal framework has led to confusion among miners causing that not all miners have been able to obtain the necessary status to resume coal shipments.

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R. Sukhyar, Director General for Coal and Mineral Resources at the Indonesian Ministry of Energy and Mineral Resources, stated that the country is plagued by structural illegal coal shipments from coal-rich regions in Kalimantan and Sumatra. Sukhyar estimates that each year between 30 and 40 million tons of coal is exported illegally from Indonesia, Southeast Asia’s largest economy. Based on current coal prices, this would imply that USD $1.2 billion worth of coal is shipped illegally per year causing the government to miss out on royalties.

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Indonesia’s House of Representatives (DPR) has passed a new plantations bill that aims to maximize land usage and opens up Indonesia’s plantation sector to smallholders. However, the retroactive clause that would limit foreign ownership to a maximum of 30 percent (from 95 percent currently) was dropped from the final version. This clause was highly controversial and would have been a major obstacle for foreign companies engaged in Indonesia’s plantation sector (such as Golden Agri-Resources and Wilmar International).

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Production is still not back on track at Freeport Indonesia’s Grasberg mine in Papua as around 1,000 workers have not showed up for work since the second week of October. These workers refuse to work after a series of (fatal) incidents that led to concern about safety policies. In May 2013, 28 Freeport Indonesia workers died after a tunnel collapsed. More recently, in late September 2014, four workers died after a giant haulage truck collided with another vehicle (carrying nine passengers) at the Grasberg mine.

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The wide current account deficit of Indonesia is expected to have eased in the third quarter of 2014. According to information from the country’s central bank, the current account deficit narrowed to 3.1 percent of gross domestic product (GDP) in Q3-2014 from 4.27 percent of GDP in the previous quarter. A deficit below the level of 3 percent of GDP is generally regarded as a sustainable level. The improvement in Q3-2014 is mainly due to resumed mineral exports after the government and several miners managed to finalize renegotiations.

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Newmont Nusa Tenggara (NNT), subsidiary of US-based mining company Newmont Mining Corp, has received a permit from the Indonesian government to export 350,000 metric tons of copper concentrate in the next three years. Three weeks ago it became known that both parties agreed on the content of a renegotiation package after an eight-month dispute over Indonesia’s mineral ore export ban, implemented on 12 January 2014 (part of the New Mining Law). In the remainder of 2014, the company is expected to export 160,000 tons.

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Indonesia Investments presents a selection of corporate earnings reports (covering the first half of 2014) of Indonesian companies that are listed on the Indonesia Stock Exchange (IDX), categorized by sector: (1) agriculture and mining, (2) basic industry and chemicals, (3) miscellaneous industry, (4) consumer goods, (5) property and real estate, (6) infrastructure, utilities and transportation, (7) finance, and (8) trade, services and investment. The tables display both net profit (loss) and revenues, together with year-on-year (yoy) growth.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) rose 0.37 percent to 5,184.48 on Thursday’s trading day (28/08) on increased expectation that the transition from the Susilo Bambang Yudhoyono (SBY) government to the Joko “Jokowi” Widodo government will be smooth and efficient evidenced by the pair's meeting in Bali to discuss various matters regarding the transfer of power. For investors, this meeting led to increased optimism. Stocks in the property and miscellaneous sectors led the gain.

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Reportedly, Newmont Nusa Tenggara (NNT) will not seek international arbitration at the Centre for Settlement of Investment Disputes (ICSID) in Washington (USA). Previously, the miner threatened to file for arbitration in an attempt to force the Indonesian government to cancel the recently introduced ban on exports of unprocessed minerals as well as to abort higher export duties. NNT is a subsidiary of Newmont Mining Corporation that operates the Batu Hijau mine, an open pit copper and gold mine in Sumbawa.

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Subsidiary of US-based natural resources company Freeport McMoRan Copper & Gold Inc, Freeport Indonesia, decided to build its copper smelter in Gresik (East Java) as infrastructure around this regency makes it easier to transport its mining products for export purposes. The other location that Freeport was considering was in Papua, near its mining site the Grasberg mine, the world’s largest gold mine and third-largest copper mine. However, infrastructure in Papua (one of the poorest regions in Indonesia) is still underdeveloped.

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Freeport Indonesia, subsidiary of US-based natural resources company Freeport McMoRan Copper & Gold Inc, is optimistic that the Indonesian government will extend the company’s contract to operate the Grasberg mine in Papua (eastern Indonesia). This mine is the world’s largest gold mine and third-largest copper mine. The current contract between the Indonesian government and Freeport Indonesia expires in 2021. However, Freeport is currently in need of some certainty before investing a large amount on mining operations and smelting facilities.

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The dispute between the Indonesian government and mining giant Newmont Nusa Tenggara (NNT) over the recently implemented ban on the export of unprocessed copper, gold, nickel, bauxite and iron is heading for a climax. In Indonesian media, President Susilo Bambang Yudhoyono was quoted saying “NNT has undermined the sense of justice of the Indonesian people” and pronounced his disappointment of NNT’s reluctance to respect the sovereignty of the state. Previously, the government said it may revoke mining permits of NNT.

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When campaigning, presidential candidates will always promise a bright future in order to gain votes. It is particularly easy for a new presidential candidate to promise golden mountains as opposed to the incumbent president who needs to be more cautious making promises as people can point to the (failed) results of his promises during the presidential term. The 2014 Indonesian presidential election was particularly interesting as we saw two new presidential candidates and, thus, the ‘inflation of promises’.

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