CONTRACTS OF ALL MINING FIRMS TO BE AMENDED

By Andi Abdussalam
Jakarta, March 8 (Antara) - The government has set a target to finish amending all contracts of mining companies before October this year, as part of its efforts to comply with Law No. 4/2009 which bans mineral ore exports.          Law No.4/2009 bans raw mineral exports as of January 12, 2014, resulting in companies in the mining business  --both mineral mining and coal mining and which export raw minerals-- must amend their contracts due to the law.         "All companies holding mineral mining permits (KK) and coal-contract of work licenses (PKP2B) should have signed contract amendment agreements before the end of President Susilo Bambang Yudhoyono's administration term in October," Minister of Energy and Mineral Resources Jero Wacik stated on Friday.          Jero Wacik said all 112 holders of KK and PKP2B permits  are expected to sign contract amendment agreements before October as part of the efforts to implement the law.          Under the law, mining companies are required to process minerals inside the country before exporting them.  "Based on the law, we are no longer allowed to export (raw minerals) as of January 12, 2014. We should consistently abide by it," Coordinating Minister for Economic Affairs Hatta Rajasa noted recently.          According to a director for technical and environment affairs at the Ministry of Energy and Mineral Resources, the government has given mining firms five years to develop factories or smelters to process or refine ore. Yet many mining firms had not begun operating smelters within that period.             Law No. 4 / 2009 and its implementing regulations have been issued in an effort to increase the added values of mineral products.  Mineral resources should be processed into finished products before they are exported so that their values would increase.          But there would be a transitional period when the country's mining exports will decline, before companies begin exporting finished goods.          The Deputy Minister for Trade Affairs said implementation of the regulation banning exports of mineral ores could result in a US$4 billion fall in exports in 2014. "We are prepared for a US$4 billion cut in exports earnings,"  Bayu Krisnamurthi said.         Bayu noted that despite the potential decline in export earnings, the impact would not be significant as world trade is expected to grow 3-4.5 percent this year. "In 2013, world trade grew 2-3 percent, and in 2014, the growth rate is expected to double, and the contribution of the mineral sector to the country's total exports is only 5 to 6 percent," he said.         In addition, the use of bio-diesel fuel, which would save up to US$3.2 billion in consumption of oil throughout the country, would help offset the decline in earnings from the exports of mineral ores, he added.          According to information from the ministry of energy and mineral resources, in the January-October 2013 period  Indonesia exported 465 million tons of nickel ore, 16.11 million tons of iron ore and sand, 47.01 million tons of bauxite and 1.02 million tons of copper concentrate.          The banning of raw mineral exports would temporarily reduce state revenues by about US$4 billion and has the potential to increase the country's trade deficit.         Indonesia's processed mineral exports stand at US$4.9 billion. The new law will lead to a decline in unprocessed mineral exports in 2014, which could lead to a decline in overall exports.  The decline in unprocessed mineral exports could also affect the country's trade balance.          However, the deficit is not expected to grow too large because the government has been trying to reduce its oil and gas imports, particularly after it issued a policy on the use of bio-diesel to offset diesel oil consumption.         "We can still have its positive aspects because we can reform our industry at home. After processing by using smelters, we can earn US$5 billion in exports," Chief Economic Minister Hatta Rajasa said.            The same opinion was expressed by Finance Minister Basri Chatib, noting that Indonesia's processed mineral exports could significantly increase in 2015 if the mineral and coal mining law is implemented and smelters have begun operating.          "Our processed mineral exports, which currently stand at US$4.9 billion, could increase to US$9 billion by 2015," he said.           The trade ministry has also issued trade ministerial regulation No. 4 of 2014 on exports of processed and refined minerals,      Under the regulation, approval is not needed for the exports of processed and refined products, but registration and verification are still needed, he said.          There are 165 groups of such goods, which include metal and non metals, such as iron, copper, nickel gold, nickel matte, Ferro-nickel, zirconium, and silicate.          Therefore, the government asked all mining firms to amend and adjust their work contracts to comply with the law.         "Of the 112 KK and PKP2B holder companies, only 25 have signed agreements on contract amendments. We will continue to approach the others so that all companies would have signed agreements before October," Minister Jero Wacik said, after witnessing the signing of agreements between the government and 15 mineral mining firms here on Friday.          He explained that negotiations on the contract amendment should have ideally finished on January 12, 2010, or one year after Law No. 4/2009 came into effect. However, the job could not be completed due to several factors that had to be adjusted, according to the conditions of the companies.          Six KK holder firms and 19 PKP2B holders signed agreements on the amendments of their contracts with the government on Friday.          "The amendment agreement signing is expected to help accelerate renegotiations of all KK and PKP2B holders based on the directives as mandated in Law No. 4/2009," Jero Wacik stated, after witnessing the signing of the amendment agreements.          The 6 KK firms are Karimun Granite, PT Tambang Mas Sable, PT Tambang Mas Sangihe, PT Iriana Mutiara Mining, PT Iriana Mutiara Indeburg and PT Woyla Aceh Mineral.           The 19 PKP2B holders are PT Batualam, PT Kadya Caraka Mulia, PT Baramarta, PT Tanjung Alam Jaya, PT Selo Argokencono Sakti, PT Eka Satya Yanatama, PT Banjar Intan Mandiri, PT Mandiri Intiperkasa, PT Darma Puspita Mining, PT Abadi Batu Bara Cemerlang, PT Selo Argodedali, PT Bara Pramulya Abadi, PT Jorong Barutama Greston, PT Turbaindo Coal Mining, PT Kartika Selabumi Mining, PT Astaka Dodol, PT Adimas Baturaja, PT Baturona Adimulya and PT Riau Bara Harum.         The minister added that renegotiations of contracts was not an easy task, because it needed a positive approach. "There are at least 86 mineral companies which have not yet signed contract amendments. We will do our best to ensure that all companies sign the contract amendments this year," the minister added.***2*** (T.A014/INE/a014) (T.A014/A/BESSR/A. Abdussalam) 08-03-2014 18