New bill aims for mining-sector integration

Ika Krismantari, The Jakarta Post, Jakarta

To promote greater integration in the mining industry, a new minerals bill will requires investments in the sector to include the establishment of complete upstream-to-downstream processing plants, an official says.

Simon Sembiring, director general for geothermal energy, minerals and coal at the Energy and Mineral Resources Ministry, said the bill, which is currently being deliberated in the House of Representatives, would encourage investors to build more smelters and refineries in Indonesia.

"We hope that the legislation will help the mining industry here to mature, and move in the direction of integrated production," Simon said.

In line with the need to develop local industry, Simon added, the law would ban the export of mineral concentrates and instead require their local refining and processing.

When asked whether the mooted legislation would effect the operations of mining firms such as PT Freeport Indonesia and PT Newmont Pacific Nusantara, which export most of their concentrate production, Simon said the government had not yet decided whether the bill would cover existing operators.

"I think they would need time to be able to establish complete processing plants as construction would require at least a year. Furthermore, it would also disrupt their sales contracts with third parties," he said.

He expressed the hope that the proposed new legislation would boost local production of copper in line with the establishment of more smelters and refineries around the country. Currently, Indonesia has only one copper smelter, which is operated by PT Gresik Smelter and processes about one-third of the copper concentrate produced in the country.

Ministry figures reveal that in 2006, Indonesia produced 3 discrete metric tones of copper concentrate, representing an increase of 7 percent as compared to 2.8 dmt in 2005.

"We are opening opportunities to foreign investors to become involved in building integrated operations," Simon said, adding that the new legislation, if passed, would provide investors with legal certainty and the motivation to intensify exploration.

The bill has been before the House for more than a year.
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