Indonesia mining rules hitting ore exports

　　Indonesia's new mineral ore export regulations have halted operations at hundreds of small mining companies, costing the country's export industry up to $164 million a month in lost nickel and bauxite sales, a mining industry body said on Friday.

　　Indonesia in May asked all miners to submit plans to build local smelters or to process ore domestically by 2014, when a total ban on raw mineral exports kicks in, or otherwise face an immediate ban on raw ore exports. It also imposed a 20 percent tax on ore exports.

　　The rules, intended to squeeze more domestic revenue from an industry that contributes around 12 percent to the GDP of Southeast Asia's largest economy, have hit companies hard, the Indonesian Association of Mineral Entrepreneurs (Apemindo).

　　"They are all stuck ... because they have been hit with very high costs," Apemindo's chairman Poltak Sitanggang said.

　　Sitanggang could not give any figures for the volume of metal ore that is not being produced or exported. Government data on mining exports is often released two to three months after the date of export, and various departments often publish figures that differ.

　　Indonesia produced 14 percent of world nickel ore output, as well as 15 percent of bauxite ore and 3 percent of copper ore in 2011, according to industry data. Most is exported raw to be processed into metals and products overseas, with Indonesia a major supplier to China, Japan and the United States.

　　The country's top copper and gold producers Freeport McMoRan Copper & Gold and Newmont Corp have recently been given permission to continue exporting ore, though many smaller firms claim they are not being allowed to export while their plans for domestic processing are being evaluated.

　　China's nickel ore imports were expected to have hit a record high in May after a rush to purchase laterite ore ahead of a curb on shipments by top supplier Indonesia.

　　Mining company demand for diesel in Indonesia is set to drop up to 20 percent this month, industry sources say, in another sign that the new rules are hurting operations for small miners in mineral-rich islands such as Borneo and Sulawesi.

　　Sitanggang said his association's data showed Indonesian nickel ore exporters were losing $86.5 million a month, and bauxite exporters losing $77.6 million a month because of the regulatory bottleneck, based on May values on the London Metal Exchange.

　　As a result, almost 15,000 Indonesian mining workers had been dismissed, he said.

　　"These new regulations were not well-planned, have been forced and have been rushed ... They are technically flawed," Sitanggang said, adding there were also major discrepancies between the way the government handles larger mining companies with Contracts of Work (COW) such as Freeport and smaller mining license (IUP) holders.

　　The government is trying to deal with around 5,000 out of 10,000 existing mining permits that it says are "unclear", following a boom in permits given out permits given out under Indonesia's decentralised system of government, and it is also trying to push for improved royalty terms with Freeport.