Indonesian miners delay alumina refinery plans on legal uncertainty

JAKARTA, June 19 Thu Jun 19, 2014 1:35am EDT

Related Topics

JAKARTA, June 19 (Reuters) - Bauxite producers are delaying plans to build alumina refineries in Indonesia due to legal uncertainty over a mineral ore export ban imposed five months ago, government and industry officials said.

Indonesia's Constitutional Court has yet to decide on a legal challenge against a Jan. 12 export ban on bauxite, nickel and other mineral ores imposed by the government to force miners to build refineries and processing plants.

Before the ban, Indonesian bauxite exports accounted for about 12 percent of global aluminimum production, with China taking the bulk of shipments for processing into alumina, an intermediate stage in the production of aluminium.

As many as five alumina refinery projects are underway in Indonesia, industry officials said, but the legal uncertainty means firms have slowed their construction plans for the refineries, which can cost as much as $1 billion each.

"They are worried if the court allows exports again, bauxite producers will be able to resume shipments of raw materials. Investors want the ban to remain," Dede Suhendra, Mineral Enterprise Director at the mining ministry, told reporters.

The case, brought by Indonesia's Mineral Entrepreneurs Association, has been put aside by the country's Constitutional Court as it focuses its attention on election-based lawsuits. The presidential election is on July 9.

Indonesia has only one chemical grade alumina refinery, opened in April by state-owned PT Aneka Tambang (Antam).

PT Well Harvest Winning Alumina, a joint venture between Indonesian conglomerate Harita Group and China's Hongqiao Group, was initially expected to begin operations at its refinery in West Kalimantan in mid-2015.

The start-date has now been pushed back to early 2016 at the earliest, said Erry Sofyan, director of PT Harita Prima Abadi Mineral, a unit of the Harita Group.

Sofyan added that he hoped the government would allow companies building refineries to export some bauxite to enable them to obtain the necessary funds for their projects.

PT Bintan Alumina Indonesia is hoping to start operations at its alumina refinery, with a capacity of 2 million tonnes a year, by early 2017, said company director Santony.

Suhendra said the government was optimistic that the court will ultimately decide in its favour, allowing refinery projects to resume.

"If the court decides to not change the ban, then I think things will go smoothly next year," he said. "I don't think the Constitutional Court will cancel the ban." (Writing by Randy Fabi; Editing by Richard Pullin)

FILED UNDER: