UPDATE 1-Indonesian mining group challenges ore export ban in court

Wed Jan 22, 2014 6:43am EST

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By Fergus Jensen

JAKARTA Jan 22 (Reuters) - Indonesia's Mineral Entrepreneurs Association (APEMINDO) has filed a legal challenge against a ban on ore exports introduced less than two weeks ago.

President Susilo Bambang Yudhoyono signed off on the controversial ore export ban on Jan. 12, although last-minute amendments eased the impact of the export ban on mining giants Freeport McMoRan Copper & Gold and Newmont Mining Corp which are now subject to an export tax.

Indonesia is the world's biggest exporter of nickel ore, refined tin and thermal coal and is an important producer of copper and gold. It is seeking to increase added value from its mineral wealth but has been widely criticised for the ore export ban, seen by many as unfeasible.

"If this policy is carried out it will kill mining businesses," Revly Harun, a lawyer for APEMINDO, told Reuters on Wednesday. "If they want to make smelters they need money for that. We don't think this ore export ban is realistic."

"For several products, such as bauxite, there is no way they can be processed domestically because of limitations," said Harun, adding that the legal challenge focuses on the domestic processing and purification of minerals.

Despite the changes to the mining export regulation, the new rules are seen hitting domestic nickel and bauxite miners hardest, and many have already begun shedding workers.

The APEMINDO challenge was filed to the Constitutional Court, Indonesia's highest legal authority, on Jan. 16.

Mining law expert Bill Sullivan, foreign counsel at Christian Teo Purwono & Partners in Jakarta, expressed doubts over the outcome of the challenge.

"It would be a very brave man who gave any firm assessment of how this may play out," he said, adding that other nickel and bauxite mining groups could also challenge the ban "on the basis of any number of arguments".

"PLAY NOT OVER"

Sullivan expects further legal challenges from other mining groups to follow.

The ore export ban and associated export tax are one of President Yudhoyono's biggest economic policy decisions since taking office nearly 10 years ago, but have been met with protests from miners large and small.

The Indonesian Nickel Association (ANI) said it was aware of and supported the legal action against the mining law, but had no plans in place to file their own legal challenge.

In late 2012, the association challenged and won a Supreme Court case that overturned several chapters of an earlier regulation banning ore exports.

"I agree fully that they went to the Constitutional Court," said Faisal Emzita, executive director of the Indonesian Nickel Association. "The government is confusing," Faisal said referring to security for investors.

"The play is not over yet."

One of the country's largest miners, Freeport McMoRan Copper & Gold inc, which recently said it would cut production amid uncertainty over the new regulations, said on Wednesday it still hoped to negotiate a reprieve. "We are still in talks with government. No result yet," Freeport's local CEO, Rozik Sutjipto said.

Earlier the Indonesian Mining Association (IMA) warned it could take legal action against the government over uncertainty surrounding the policy.

IMA deputy chairman Tony Wenas said the mineral export tax threatened to kill the industry.

"Companies might be shut down, because what we've produced of course should be sold, and if we have to pay an export tax of 20 to 25 percent, we lose our profit," Wenas said. (Additional reporting by Wilda Asmarini, Yayat Supriatna and Michael Taylor; Editing by Stephen Powell)

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