Indonesian authorities impose penalties on mining companies for project delays

Three mining companies in Indonesia are now facing penalties due to delays in completing their refinery projects, following findings in the 2023 Audit Report by the Supreme Audit Agency (BPK). The report highlighted potential non-tax state revenue from administrative fines related to these delays, amounting to US$129 million (Rp2 trillion), which has yet to be collected.

The Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia, emphasised that alumina refinery construction was expected to be completed by 2023. While companies that missed this deadline are still being granted export permits, they must meet special conditions based on the progress of their refinery construction. These companies are typically subject to fines.

Indonesia Business Post (IBP) reported that the ESDM ministry had fined three companies: PT Dinamika Sejahtera Mandiri, which was fined $769,000; PT Persada Pratama Cemerlang, which was fined $14,900; and PT Sumber Bumi Marau, which faces the most significant penalty of $12.3 million.

On August 26, 2024, the Minister of Energy and Mineral Resources (ESDM) said, "The collection process is currently underway."

¹As of March 2024, the Ministry shared updates on the progress of the following three alumina refinery projects:

• PT Dinamika Sejahtera Mandiri in Sanggau, West Kalimantan: The alumina refinery project has reached 58.55 per cent completion. The facility is planned for alumina production with a capacity of 5.2 million tonnes per year, aiming to produce 2 million tonnes of smelter-grade alumina (SGA) annually. However, financing the project has proven difficult.
• PT Persada Pratama Cemerlang in Sanggau, West Kalimantan: This alumina refinery project, now 52.62 per cent complete, is a testament to its team's dedication and expertise. The project is making significant strides, with a processing capacity of 2.52 million tonnes per year and a target of 1 million tonnes of SGA annually. Despite the challenges in attracting investors, the progress made so far reassures its capabilities.
• PT Sumber Bumi Marau in Ketapang, West Kalimantan: With a progress rate of 50.05 per cent, this alumina refinery project has a processing capacity of 2.6 million tonnes per year and aims to produce 1 million tonnes of SGA annually. Like the other two, it is also facing investor-related challenges.

These alumina refinery projects are part of a larger initiative involving 16 integrated projects across different commodities:

• Seven nickel smelters, with a total investment of US$2.68 billion
• Seven alumina refineries requiring US$5.85 billion
• One iron smelter costing US$51.5 million
• One copper smelter with a budget of US$3.08 billion

¹Source: Indonesia Business Post (IBP)