BUSINESS

Smelter Projects Face Delays Over Legal Review

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The government has expressed its concern over sluggish progress in the construction of smelters and refineries as several mining companies look to delay their projects pending a ruling from the Constitutional Court.

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Dede Suhendra, the director for minerals at the Energy and Mineral Resources Ministry, said mining firms had tended to slow down their smelter and refinery construction as they are hoping the court’s ruling will be beneficial for them.

However, the court is now busy with cases related to elections, a situation that will further delay the legal review into the 2009 Mineral Law.

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“They [mining companies] have become somewhat relaxed. We are planning to summon them [for meetings] next week to report on the progress of their smelter development. We haven’t received reports as they are awaiting the court’s ruling,” Dede said.

Mining industry players, namely Indonesia’s Mineral Entrepreneurs Association (Apemindo), PT Harapan Utama Andalan, PT Pelayaran Eka Ivanajasa and Koperasi TKBM Kendawangan Mandiri, in February submitted their request for a judicial review of the 2009 Mining Law, which serves as the legal basis for the mineral ore export ban.

The group challenged articles in the 2009 Mining Law that stipulate that mining companies should process and refine their raw minerals in domestic smelters before exporting them, in order to give added value to the country’s mining sector.

The group claimed that the government had misinterpreted the articles as a ban on ore exports, which is actually not stipulated in the law. The government started imposing the ore export ban on Jan. 12.

The Constitutional Court held the latest hearing on the issue on May 7. The government is slated to present experts to testify at the next hearing. However, the exact date of the hearing has not yet been set.

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“Many miners are now revising their feasibility studies on concerns that the court will rule against the export ban,” Dede said, adding that the government has prepared materials for the next hearing.

Erry Sofyan, secretary-general of the Indonesian Bauxite and Iron Ore Entrepreneurs Association, admitted that some mining companies may be waiting for certainty over the export ban policy. Following the ban, bauxite is among minerals that can no longer be sold overseas unless they are processed into alumina.

According to Erry, companies that are building smelters and refineries are facing difficulties in securing funding for their projects because they no longer have a cash flow from exporting ores and banks are reluctant to provide funding when there is no guarantee that companies would be able to repay their debts.

Erry is also a director of PT Harita Prima Abadi Mineral, which is developing a bauxite smelter in Kalimantan. The smelter development is now four months behind schedule, according to Erry.

“There are matters related to social problems, such as about land clearing, and prolonged permission processes, such as permits related to environmental studies. We were facing funding problems, but we can handle them as we have backup from our Chinese partners to obtain funding,” he said.

Harita’s smelter is scheduled to be completed by the end of 2015. (Raras Cahyafitri, The Jakarta Post)

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