Jurisdiction - Indonesia
Reports and Analysis
Indonesia – Investment In Mineral Refining And Processing Sector: Value-Added Regulations And Industrial Policy.

1 August, 2012

 

 

BACKGROUND
 
On 6 February 2012, Indonesia’s Minister of Energy and Mineral Resources promulgated Regulation No. 7 of 2012 (“MEMR Reg. No. 7/2012“) on increasing the value ofminerals through the activities of mineral purification and processing. This regulation, which applies to metals (such as bauxite, copper, gold, iron, nickel and tin), non-metal minerals and rocks (but not to coal), implements the requirement of
Law No. 4 of 2009 on Mineral and Coal Mining (“2009 Mining Law“) that mining companies process minerals and coal domestically prior to export. Due to concerns voiced from both mining companies and trading partners, the implementation of the ban on unprocessed exports – originally scheduled for 6 May 2012 – has been deferred until 2014, so long as the proposed exporter can fulfil certain conditions. These conditions – provided in Regulation No. 11 of 2012 (“MEMR Reg. No. 11/2012“) and related regulations promulgated by the Director General of Minerals and Coal and the Minister of Trade – are intended, among other things, to prevent ore exports by illegal miners. Reportedly, smaller Indonesian mining operations, which operate pursuant to a mining business license (izin usaha pertambangan or “IUP“), have been the most immediately affected by these new requirements (although “Contracts of Work” are potentially affected as well).
 
The domestic processing obligations have the potential to encourage large-scale investments in smelters and other processing facilities, and the perceived need for investment in such facilities has been increased by the promulgation of MEMR Reg. No. 7/2012 and related regulations. Indeed, the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (Masterplan Percepatan dan Perluasan Pembangunan Ekonomi Indonesia or “MP3EI“), for the period 2011 to 2025, includes as goals the development of an integrated aluminium industry, the strengthening of downstream nickel industries, and the further development of steel smelting and stainless steel production capacity. Many Indonesian mining companies have, however, been negatively impacted by the value-added policy, with some companies ceasing operations completely and many laying off workers. The value-added policy has also received criticism from both China and Japan, which have smelting and processing industries that rely heavily on imports of raw materials from Indonesia. As of 12 June 2012, the Japanese government had indicated that it may make a complaint to the World Trade Organization regarding the policy.
 
EXISTING SMELTER FACILITIES
 
With the exception of tin smelters (Indonesia is the world’s largest refined tin exporter), existing smelter facilities in Indonesia are limited.
 
PT Aneka Tambang (Persero) Tbk.
 
PT Aneka Tambang (Persero) Tbk. (“Antam“), Indonesia’s 65% state-owned integrated mining company (listed on the Indonesia Stock Exchange (“IDX“) and the Australian Securities Exchange (“ASX“)), has three ferronickel smelters in Pomalaa, Southeast Sulawesi (FeNi I, FeNi II and FeNi III), for a total capacity of 26,000 tpy. Antam is developing a fourth ferronickel smelter to be located in Buli, East Halmahera, North Maluku. (Antam also operates a precious metal refinery in East Jakarta through its subsidiary PT Logam Mulia.) Antam’s other announced projects in development are described in Appendix A.
 
PT Indonesia Asahan Aluminium
 
PT Indonesia Asahan Aluminium (“Inalum“) operates the only aluminium smelter in Indonesia, a 225,000 tpy aluminum smelter in North Sumatra. Inalum’s facility was established pursuant to a 1976 joint venture between the Indonesian government (holding 41.12% of Inalum), and Nippon Asahan Aluminium (which is 50% owned by the Japan International Cooperation Agency, with 11 other firms holding the
remainder) (holding 58.88% of Inalum). This joint venture is due to expire in October 2013.  In 2011, the Government Investment Center (Pusat Investasi Pemerintah or PIP) announced its intention to acquire the remaining shares in Inalum at the conclusion of the joint venture, although other parties had expressed interest in acquiring a stake in the company as well. In March 2012, the government confirmed its intention to acquire the project, indicating a rejection of the proposal from the Japanese consortium for a 30-year extension of the joint venture tied to additional investment and an expansion in capacity. “Govt to take over Inalum for $700m, Hatta says,” The Jakarta Post (3 March 2012). National Aluminium Company Limited of India had also reportedly expressed interest in acquiring a stake in Inalum. “Nalco in talks to buy Indonesian firm Inalum,” The Hindu Business Line (15 July 2012). 
 
PT Smelting
 
PT Smelting, which is 25% owned by PT Freeport Indonesia, operates Indonesia’s first and only copper smelter, a 270,000 tpy copper smelter in East Java. PT Smelting processes copper concentrate from Freeport’s Grasberg Mine (located in Papua) and Newmont’s Batu Hijau mine (located in Sumbawa). The other shareholders in PT Smelting are Mitsubishi Materials Corporation (60.5%), Mitsubishi Corporation Unimetals Ltd. (9.5%) and Nippon Mining & Metals Co., Ltd. (5%).
 
CONTRACTS OF WORK
 
Generally, existing large metal mining operations in Indonesia are conducted under a “Contract of Work” (“COW“) with the Indonesian government, based on the predecessor mining law. Under the 2009 Mining Law, it intended that these COWs are to be adjusted based on renegotiation (except for terms relating to state revenues). It is unclear how and to what extent the value-added requirements will impact these negotiations, as each company has unique operations
 
PT Vale Indonesia Tbk.
 
PT Vale Indonesia Tbk., the IDX-listed subsidiary of Brazil’s Vale S.A., and Indonesia’s largest nickel miner, has domestic processing operations and produces nickel matte, an intermediate product. PT Vale Indonesia Tbk. has already announced the planned construction of a smelter, as well as additional production furnaces and electricity generation infrastructure.
 
PT Freeport Indonesia
 
PT Freeport Indonesia, an affiliate of Freeport-McMoran Copper & Gold Inc. (“FCX“), processes a portion of its copper concentrate through PT Smelting, but has also exported copper concentrate from the Grasberg mine to the smelting unit of Atlantic Copper S.L.U., a Spanish subsidiary of FCX, and to customers under long-term contracts. Reportedly, PT Freeport Indonesia intends to supply concentrates for domestic processing to PT Indosmelt and PT Nusantra Smelting, both of which are constructing new projects (detailed in Appendix A).
 
PT Newmont Nusa Tenggara
 
PT Newmont Nusa Tenggara, the copper and gold mining company and affiliate of Newmont Mining Corporation, exports copper concentrate and also processes a portion of its copper concentrate through PT Smelting. As of February 2011, PT Newmont Nusa Tenggara had concluded that construction of copper and gold smelters was not economically feasible. Reportedly, the company also plans to supply concentrate to PT Indosmelt and PT Nusantara Smelting.
 
PT Weda Bay Nickel
 
PT Weda Bay Nickel, the development phase nickel mining company, owned by Strand Minerals Pte. Ltd (90%) (a Singapore-based company owned by ERAMET S.A., Mitsubishi Corporation and Pacific Metals Co. Ltd.) and Antam (10%), has included a hydrometallurgy and processing plant for production of a nickel product and cobalt sulphide in its planned project. Construction of the project is expected to
commence in 2013.
 
PT Jogja Magasa Iron
 
PT Jogja Magasa Iron, a joint venture between Indo Mines Limited (listed on the ASX, 19.9% of which had been acquired by the Rajawali Group as of February 2012) (70%) and PT Jogja Magasa Mining (reportedly owned by the Sultan of Jogjakarta and other individuals) (30%), is developing a 2 million tpy iron concentrate mine and processing facility in Kulon Progo Regency, Yogyakarta.
 
PT Agincourt Resources
 
PT Agincourt Resources, a subsidiary of G-Resources Group Limited (listed on the Hong Kong Stock Exchange), is developing the Martabe gold and silver mine project, in North Sumatra. The mine was reportedly expected to commence commercial production of gold in July 2012 and is anticipating production of 250,000 ounces per annum of gold and 2-3 million ounces per annum of silver for a minimum of 10 years. G-Resources has reportedly entered into an agreement with Antam’s subsidiary, PT Logam Mulia, to purify gold and silver from the Martabe mine.
 
OTHER ANNOUNCED PROJECTS
 
Numerous investors have announced intentions to build smelters in Indonesia in anticipation of the 2014 deadline to comply with the value-added requirements. Details of the various projects that have been announced, based on media reports and other public information, are contained in Appendix A. Reportedly, as of 9 July 2012, 185 companies had made proposals for smelter projects to the Ministry of Energy and Mineral Resources (“MEMR“). Ignasius Laya and Nurseffi Dwi Wahyuni, “185 Companies Apply for Smelter Construction Permit,” Indonesia Finance Today (9 July 2012). 
 
VALUE-ADDED REQUIREMENTS
 
MEMR Reg. No. 7/2012 restricts the ability of holders of an IUP to export ore and other unprocessed minerals, and provides the minimum levels of processing and purification (for both IUP holders and COW contractors) that each type of mineral is required to undergo prior to export. 
 
MEMR Reg. No. 7/2012 also provides that, with government approval, mining companies may cooperate with each other to fulfill the processing and purification requirements through the domestic buying and selling of unprocessed minerals, jointly processing minerals, constructing shared facilities or establishing a joint venture to construct the required facilities. Additionally, mining companies that have obtained temporary licenses to sell minerals recovered during exploration and feasibility stages, and holders of mineral sales licenses that are not licensed mining companies, are only permitted to sell minerals domestically.
 
Programs for complying with the value-added requirements are to be reported to the relevant authorities (the applicable mayor, regent, governor and/or the Director General of Minerals and Coal) for evaluation. Sanctions for failure to comply with MEMR Reg. No. 7/2012 include license revocation and administrative sanctions. Requirements vary, depending on the phase of the mining activity.
 
Exploration Phase
 
Existing exploration IUP holders and contractors under COWs that are conducting exploration or preparing a feasibility study are required to adjust their processing program to comply with the value-added requirements no later than 6 February 2015 (three years after the promulgation of MEMR Reg. No. 7/2012).
 
Construction Phase
 
Existing IUP production operation holders and contractors under COWs that are engaged in mine and infrastructure construction are required to adjust their processing program to comply with the value-added requirements no later than 6 February 2016 (four years after the promulgation of MEMR Reg. No. 7/2012).
 
Production Phase
 
Existing IUP production operation holders and contractors under COWs that have commenced production are required to adjust their processing program to comply with the valueadded requirements no later than 12 January 2014 (five years after the promulgation of the 2009 Mining Law). 
 
PROJECT FINANCING 
 
Smelter and processing plant projects provide a potential basis for limited recourse project financing, with a revenue stream to be provided by either off-takers purchasing  processed materials from the smelter company or by mining companies paying a processing fee to the smelter company under a tolling arrangement. For smelter projects intended to derive significant feedstock directly from numerous small mines, project financing based on the long-term  commitments of creditworthy off-takers may be a viable option. Projects with feedstock from established large Indonesian mines, or from a credit worthy commodity trader aggregating feedstock from small mines, could potentially use a tolling arrangement. The availability of export/import credit support (from countries seeking to export goods and services for the project and/or to import the resulting products), and hedges for commodity price and interest rate fluctuations, will also be fundamental for the preparation of a bankable project. Additional issues relating to financing a project in Indonesia include:
 
Security Package
 
Financing of smelter construction may be secured by a customary Indonesian security package (fiduciary security over movables, receivables and eligible intangibles, land and building mortgages, pledges of shares and pledges of accounts). The collateral package generally cannot include, however, the mining licenses, any minerals for which royalties have not yet been paid (and therefore to remain state property), any land areas controlled or owned by the state (such as forest areas used pursuant to a “borrow use” license (izin pinjam pakai)), and benefits of contractual obligations other than the right to receivables. Corporate and/or individual guarantees, and powers of attorney, conditional novation or consents relating to commercial agreements, may be appropriate under some structures as well. Government Reports and Consents Financial obligations of Indonesian companies and individuals in favour of offshore entities may require reporting to Bank Indonesia (the central bank), the Ministry of Finance and the PKLN Team (Tim Koordinasi Pengelolaan Pinjaman Komersial Luar Negeri or Offshore Commercial Loan Team). Numerous reports to the MEMR, the relevant regional government and, for projects in forest areas, the Ministry of Forestry will also be required during preparation, construction and operational stages. Moreover, under some structures, consents from the MEMR relating to commercial contracts
may also be required; an IUP production operation typically contains a term requiring ministerial approval of any long-term sales contract (duration of 3 years or more). Pricing formulas under long-term contracts may also be constrained by policies requiring sales to be completed with reference to a metal mineral and non-metal mineral reference mprice (under Minister of Energy and Mineral Resources
Regulation No. 17 of 2010 on the Procedure for Determining the Reference Price for Sales of Minerals and Coal). Unlike the reference price policy for coal, the reference price policy for metal minerals and non-metal minerals has not yet been implemented.
 
Use of Domestic Accounts
 
Account controls and related security devices under proposed financing structures must comply with Bank Indonesia Regulation No. 13/20/PBI/2011 concerning Receipt of Export Proceeds and Withdrawal of Foreign Exchange from External Debt, which generally requires that, from 2 January 2012: 
 
  • Proceeds from exports be received in an Indonesian foreign exchange bank; and 
  • Proceeds from a non-revolving loan agreement not used for refinancing, and certain other types of credit obligations to offshore creditors, be received in an Indonesian foreign exchange bank.
 
This regulation limits the use of offshore accounts in a financing structure.
 
PROJECT IMPLEMENTATION
 
Issues to consider in the formulation and implementation of smelter and processing plant projects include:
 
Environmental Issues
 
Generally applicable considerations relating to environmental impact assessment (known in Indonesia as AMDAL) will naturally be relevant to smelter projects, including the potential for significant electricity and water needs and NOx, H2S, SO2 emissions. Many by-products from a smelter may be classified as B3 (bahan beracun dan berbahaya) waste (toxic and hazardous waste) under prevailing environmental regulations, and therefore require specific programs for the
storage, transportation and disposal of such wastes and related licenses.
 
Electricity
 
Many smelter projects have been proposed for areas that may have only limited access to electricity. In June 2012, PT PLN (Persero) (Indonesia’s state-owned electricity company) announced that it had received 16 proposals for electricity connections for processing plants and smelters. (Novan Dwi Putranto and Nurseffi Dwi Wahyuni, “PLN Kantongi 16 Proposal Suplai Listrik untuk Smelter,” Indonesia Finance Today (12 June 2012). Other investors reportedly intend to construct their own captive power plants.
 
Land acquisition and land use restrictions
 
Technical evaluation of the status of the proposed project site – including whether it is subject to customary land rights (adat) and whether it contains forest areas – will be necessary. Any rural land acquisition program will require coordination with local authorities and communities and experienced representatives.
 
Fiscal incentives
 
Projects may potentially benefit from various fiscal incentives provided by the Indonesian government, such as:
 
  • an import duty exemption for capital goods and materials or raw materials that are to be used as materials or components to produce finished goods;
  • income tax incentives, including a corporate income tax holiday for investments in certain “pioneer industries”; and 
  • restitution of import duties paid on the importation of goods and materials needed to manufacture exported finished products.
 
OBTAINING APPROVAL FOR ORE AND RAW MATERIAL EXPORTS
 
Recognizing that smelter and processing facilities require time to develop, finance, construct and commission, the government has provided IUP production operation holders with the option to continue to export raw materials until 2014, so long as various conditions are fulfilled. Reportedly, as of 11 July 2012, the MEMR had announced the issuance of export permits to 36 mineral mining companies.
(Ignasius Laya and Wilda Asmarini, “Gov’t issues 36 Mineral Export Permits,” Indonesia Finance Today (11 July 2012). Ore and raw material exports are subject to the authority of the MEMR (as the regulator of mining activities), the Ministry of Trade (as the regulator of trading and export activities), and the Ministry of Finance (as the regulator of export duties).
 
Each of these regulators has contributed to the regime for obtaining approval for ore and raw material exports. Novan Dwi Putranto and Nurseffi Dwi Wahyuni, “PLN Kantongi 16 Proposal Suplai Listrik untuk Smelter,” Indonesia Finance Today (12 June 2012). Ignasius Laya and Wilda Asmarini, “Gov’t issues 36 Mineral Export Permits,” Indonesia Finance Today (11 July 2012). Some of the key results of the various recommendations, approvals and requirements are as follows:
 
  • a mining company will be required to demonstrate compliance with the various regulatory requirements imposed on it and some efforts towards fulfilling the value-added requirements by the applicable deadline;
  • a mining company will be required to disclose the underlying contract with the offshore purchaser of the commodity; and
  • mining companies that are authorised to export ore and raw materials will be subject to a 20% export duty (based on Minister of Finance Regulation No. 75/PMK.011/2012).
 
General Requirements for Export Recommendation
 
MEMR Reg. No. 11/2012 provides that an IUP holder may export ore or raw materials if the IUP holder obtains a recommendation from the Director General of Minerals and Coal. Under MEMR Reg. No. 11/2012, in order to receive such a recommendation, a mining company that holds an IUP production operation (Requirements for holders of a special IUP for transportation and sales and a special IUP for processing and refining differ from the requirements applicable to holders of IUP production operation) must fulfil the following requirements:
 
  • the IUP production operation must be deemed “clear and clean”;
  • the IUP holder must have fulfilled all financial obligations to the state;
  • the IUP holder must deliver a work plan or cooperation plan for domestic processing and/or refining; and
  • the IUP holder must sign an integrity pact.
 
These requirements have been supplemented by the Director General of Minerals and Coal in Regulation No. 574.K/30/DJB/2012 (“Reg. No. 574.K“). This regulation provides different criteria for a recommendation to become a registered exporter and a recommendation for export approval, under regulations promulgated by the Minister of Trade. The requirements for a recommendation for export under MEMR Reg. No. 11/2012 do not purport to apply to COW contractors (although the Minister of Trade regulations described below do).
 
“Clear and Clean” Status
 
Based on presentation materials of the Directorate General of Minerals and Coal, dated 8 June 2012, an IUP holder will be deemed “clear and clean” if the IUP holder can provide the following:
 

 

  • evidence of no overlapping;
  • the required permits;
  • the required exploration report;
  • the required feasibility study;
  • an approved environmental document; and
  • evidence of dead rent and royalties having been paid.
 
Except for evidence of no overlapping, (The requirement that there be no overlapping may require further clarification from the Directorate General of Minerals and Coal. Under the 2009 Mining Law, it is legally possible for a mining area for one mineral to overlap with the mining area of another, with the relevant companies remaining in compliance with regulatory requirements. Additionally, mining areas may overlap due to a legitimate boundary dispute between regencies and/or provinces or a technical error.) a mining company that is in compliance with prevailing regulations should have fulfilled these requirements in the ordinary course of business. As of 21 May 2011, the MEMR had deemed 3,971 mining companies “clear and clean”. On 28 February 2012, the MEMR announced that an additional 373 mining companies had received the designation; on 9 May 2012, another 235 mining companies; and on 30 May 2012, another 211 mining companies. 
 
Based on Reg. No. 574.K, in order to qualify for a recommendation letter for export, an IUP holder’s “clear and clean” status must be evidenced by a copy of a “clear and clean” certificate. Reportedly, as of 19 July 2012, the MEMR announced that 392 mineral IUP production operation holders (around 50.3% of the 778 nickel, iron, bauxite, copper and manganese mining companies in Indonesia) have not yet obtained a “clear and clean” certificate. (Novan Dwi Putranto, “392 Mining Permits Fail to Meet Clean and Clear Status,” Indonesia Finance Today (19 July 2012).)
 
Terms of the Integrity Pact
 
The terms of the Integrity Pact, as stipulated in Reg. No. 574.K, provides that the signatory undertakes to do the following:
 
  • to improve the applicable commodity value by developing a processing and refining facility or cooperating with other parties (holders of IUP production operation, special mining business license (izin usaha pertambangan khusus) production operation or special IUP for processing and refining) in relation to processing and refining, in accordance with the minimum standards in MEMR Reg. No. 7/2012; to fulfil the obligation to provide processing and refining acilities at the latest by 12 January 2014 and report the progress of the facility development every 3 months to the Director General of Minerals and Coal;
  • to comply with the total amount of export sales of raw material/ore that is permitted by the government;
  • to prioritize the fulfilment of domestic supply needs;
  • to pay the export duty in accordance with the tariff as stipulated by the government;
  • to fulfil the obligation to pay tax and non-tax state revenue in accordance with applicable laws and regulations;
  • to fulfil the requirements as stipulated during consultation with the Director General of Minerals and Coal;
  • if the party intends to conduct an initial public offering, to conduct such offering in Indonesia;
  • to protect and maintain the environment; and 
  • to encourage the development and empowerment of society.
 
REGISTERED EXPORTER AND EXPORT APPROVAL
 
The Minister of Trade has required that the proposed exporter become a registered exporter of mining products (eksportir terdaftar produk pertambangan or ET Produk Pertambangan) and to obtain an approval to export the mining products, based on Minister of Trade Regulation No. 29 of 2012 (“MOT Reg. No. 29/2012“). Both COW contractors and IUP holders are required to comply with these requirements in order to be authorized to export ore or raw materials. The requirements for obtaining status as a registered exporter and approval to export include respective recommendations from the Director General of Minerals and Coal (as well as various administrative documents). Status as a registered exporter is to be valid for two years. MOT Reg. No. 29/2012 also requires that the ore or raw materials to be exported must be subject to a technical survey by a qualified surveyor. Recommendation for Becoming a Registered Exporter Reg. No. 574.K provides that in order to receive a recommendation to become a registered exporter of mining products, in addition to the general requirements required by the MEMR Reg. No. 11/2012:
 
  • the IUP holder must provide a copy of a memorandum of understanding with other IUP holders for purposes of cooperation for the construction of processing and refining facilities; and
  • the IUP holder must provide a copy of the sale and purchase agreement with the end user (purchaser)
 
Recommendation for Export Approval
 
In order to receive a recommendation for an export approval, Reg. No. 574.K requires that a mining company that holds an IUP production operation must provide:
 
  • a copy of evidence of status as a registered exporter;
  • an export plan, which includes, among other things, the type and amount of mineral commodities than are going to be exported, the category of goods (for purposes of export duty), the port of loading, the port of unloading and the destination country;
  • data regarding resources, reserves and production; 
  • a copy of the sale and purchase agreement with the end user (purchaser);
  • a copy of evidence that the required reclamation guarantee for the mining area has been put in place; and
  • a copy of evidence that dead rent and royalties (and for non-metal minerals and rocks, certain taxes) have been paid for the last year.
 
POTENTIAL DIVESTMENT REQUIREMENT
 
The 2009 Mining Law provides that mining companies will be subject to some level of share divestment, i.e., a requirement to sell a portion of share capital to domestic investors over a certain time period. The requirement of share divestment has long been found in the terms of COWs, but it was only in February 2010 that the government presented a generally applicable divestment requirement for mining companies operating pursuant to an IUP (20% domestic ownership after the fifth year of production). In February 2012, these divestment requirements were increased to 51% domestic ownership by the 10th year of production, with  divestment starting gradually after the fifth year of production (at least 20% by the sixth year; at least 30% by the seventh year; at least 37% by the eighth year; at least 44% by the ninth year; and at least 51% by the tenth year after the commencement of commercial production).
 
These stricter divestment requirements are controversial when considered with reference to mining operations only. However, a separate issue is whether these requirements will apply to companies that operate smelters independent of a mine. The regulatory framework contemplates that companies could operate such projects pursuant to an IUP for processing and refining, such as through a joint venture among various mining companies. As of 6 June 2012, numerous press reports contained statements that the MEMR would impose the divestment framework applicable to mining operations to smelter projects as well, despite subsequent mstatements to the contrary by the Minister of Trade, Gita Wirjawan, and the Coordinating Minister for Economic Affairs, Hatta Rajasa (Novan Dwi Putranto and Nurul Fitriani, “Investasi Smelter Tidak Dibatasi,” Indonesia Finance Today (8 June 2012).
.
The 2009 Mining Law provides that processing and refining of minerals are part of mining business activities. On that basis, a smelter project may be legally included under the government’s divestment requirements. Numerous factors, however, suggest that the MEMR should adopt a special divestment policy, or completely waive the divestment requirement, for companies that engage in processing and
refining without actually owning a mine:
 
  • the current divestment requirements are tied to the operational age of a mine and therefore are not appropriate for an independent smelter project;
  • an independent smelter project’s capital requirements and expected revenues will be different from that of an integrated mine and smelter project; because these projects will require large up-front capital expenditure for construction, without any revenue source during the construction phase, a divestment requirement could undermine the financial feasibility of some projects; and 
  • share capital held by foreign investment companies (“PMA companies“) is deemed to be foreign share capital; in the event that two or more PMA companies establish an independent smelter project through a joint venture company, the joint venture company should not be subject to another level of divestment after the mining company partners have fulfilled their respective divestment requirements.
 
The 2010 Negative List of Investment (based on Presidential Regulation No. 36 of 2010) does not include any restrictions on mineral processing and refining (except for lead smelting, which requires a special approval from the State Minister for the Environment and the Minister of Industry). Therefore, initially, any independent smelter project could be 100% foreign owned. The divestment policies do, however, fall within the regulatory authority of the MEMR. Investor feedback is therefore critical to promote the establishment of policies that are consistent with the government’s industrial development goals.
 
For a list of Announced Smelter and Metal Processing Plant Projects, please see page 9 on the document by clicking here.
 

 

 

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