As expected Indonesia banned all mineral ore exports on Sunday but it appears likely to allow mining giants Freeport McMoRan Copper and Gold and Newmont Mining Corp to continue to ship billions of dollars’ worth of copper overseas. The nation is the world’s biggest exporter of nickel ore, refined tin and thermal coal, and is home to the fifth largest copper mine and top gold mine.  1

The government-imposed ban aims to boost Indonesia’s long-term return from its mineral resources by forcing miners to process ores domestically however officials fear that a resulting short-term cut in foreign revenue could widen the current account deficit.

“Starting at midnight on January 12, 2014, raw ore definitely cannot be exported,” Energy and Mines Minister Jero Wacik told reporters shortly after a marathon meeting with the president and cabinet ministers.

However, in one of his biggest economic policy decisions since taking office nearly 10 years ago, Reuters said President Susilo Bambang Yudhoyono passed a last-minute regulation that will likely ease the ban’s impact for major mining companies like Freeport and Newmont.

“Not only Freeport and Newmont, but we have 66 companies that have said they will build smelters ... these (firms) will get a chance to export processed minerals,” Jero Wacik said.

Most of the companies expected to feel the impact of the ban are hundreds of small domestic miners that cannot afford to invest the hundreds of millions of dollars needed to build a smelter. The World Bank says mineral shipments totalled $10.4 billion in 2012, or around 5% of Indonesia’s total exports.

The uncertainty over the ban has forced Indonesia’s top copper producer, Freeport, to halt exports until the government provides clarity on which minerals can be shipped, a union official told Reuters. Company spokeswoman Daisy Primayanti said Freeport continued to provide copper to its local smelter for use domestically.

Freeport, Indonesia’s dominant copper producer with 73% market share, recently warned an unrevised ban would cut output at its Grasberg mine by 60% and lead to lay-offs of half of its 15,000 Indonesian employees.

Under the proposed regulation that was being reviewed by the president in the run-up to the deadline, Freeport, Newmont and other miners would still be allowed to export copper, manganese, lead, zinc and iron ore concentrate until 2017. But nickel ore and bauxite exports worth more than $2 billion annually would still be banned, while coal and tin shipments would not be affected. However, it was not clear whether the final regulation had been revised.

“In our discussion (about the ban), our considerations were first about the workforce, which shouldn’t face mass layoffs,” Jero Wacik said. “Second was about the local economy, so it doesn’t face any burden from the new regulations. Then, domestic companies should be allowed to continue operating.”

Indonesian miner Perusahaan Perseroan Aneka Tambang (Antam) also stopped nickel ore exports a few days ago, the firm’s corporate secretary Tri Hartono said.

Resource Center Whitepapers, Videos, Case Studies