November 6, 2012 / 7:16 AM / 7 years ago

UPDATE 2-Indonesia to review unprocessed metal ore export rules

* Govt ministers say yet to see court verdict on mining rule

* Full court verdict likely to take weeks

* Miners hope ruling will pave way for resumption in exports (Adds comments, details)

By Fergus Jensen

JAKARTA, Nov 6 (Reuters) - Indonesia will review its rules on the export of unprocessed metal ores after a supreme court ruling upheld a challenge to a government ban on such shipments, Energy and Mineral Resources Minister Jero Wacik said on Tuesday.

The court decision could pave the way for a resumption of exports by small mining companies, which were hit hard by the restriction imposed in May by Indonesia, the world’s largest exporter of nickel ore and a significant exporter of bauxite and iron ore.

The ruling is likely to prompt further uncertainty in a $93 billion sector reeling from a series of regulatory changes this year, although it is unclear whether it will lead to an immediate increase in exports.

“We want to improve the economy. So we will weigh up everything and then find the best way out,” Wacik told a news conference.

Mining constitutes 12 percent of GDP in Indonesia, the largest economy in Southeast Asia. Policy flip-flops have been one of the biggest challenges for investors in the sector, along with corruption, red tape and poor infrastructure.

Wacik said he was seeking information from the court about the ruling but had not seen it personally.

The Indonesian Nickel Association (ANI) and the Association of Indonesian City and Regional governments, which brought the case, showed Reuters a document on Monday that independent lawyers said was an extract of the supreme court ruling.

The supreme court’s website also listed a status update, saying the two cases brought by the plaintiffs were “partially granted” on Sept 12. It gave no further details and did not post a copy of the decision.

The regulations issued this year aimed to add value to Indonesian exports and encourage firms to build smelters. The have already led to billions of dollars in proposed smelter investments, particularly for bauxite and aluminium.

But many companies have complained the rules hurt their ability to export, Wacik said. Japanese mining firms in particular have urged the government not to do anything to stop exports because it would bankrupt their factories, he added.


“I don’t want to bankrupt anybody. That would be a sin,” Wacik said. “In the transition period (around a 2014 deadline) I may look at which companies have already built smelters, that have laid the foundations. These would be allowed to export again until 2014, and then their exports must stop.”

Holders of mining business licenses (IUPs) will need to wait for clarification of the full verdict from the Supreme Court, without which the government and other stakeholders can make no decisions on the matter. This could take weeks.

Bill Sullivan, a lawyer and mining specialist at Christian Teo Purwono & Partners in Jakarta, said the government might be able to override the court’s decision by getting the trade ministry to issue another similar regulation.

“The supreme court’s principal concern ... seems to have been that the Ministry of Energy & Mineral Resources had been inappropriately given control over an export matter, when this was really part of the authority of the Ministry of Trade,” Sullivan said.

The court ruling does not affect parts of the 2009 Law on Mining that ban all raw mineral exports after 2014.

The government’s mining rules do not apply to big players such as Freeport McMoRan Copper & Gold and Newmont Mining Corp, which along with coal mining are not covered by this part of the regulations.

An executive at one small miner, which was forced to sell its nickel mine because of the export ban, expected the government to re-issue the rules. Some parts may be stripped out but requirements for ‘clean’ permits and a 20 percent export tax, which have hurt small miners, are likely to stay, he said.

“It will be an even bigger mess for export procedures now until it is cleared up, because there are a lot of other downstream departments and agencies that would need to be instructed, such as customs and ports,” said the executive, who declined to be identified.

Any cancellation of the ban should favour exporters and increase volumes, according to a report by Riaz Hyder, an analyst at Macquarie Capital Securities in Jakarta.

“The key takeaway from the reported ruling, however, is that the industry bodies ultimately appear to have had a fair trial and common sense has prevailed,” the report said. (Additional reporting by Neil Chatterjee, Andjarsari Paramaditha and Rieka Rahadiana; Writing by Matthew Bigg; Editing by Jane Baird)

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