Indonesia Investment Coordinating Board BKPM announced three processing and mineral concentrate refineries (smelters) are in the construction phase and they expect them to be ready for production in Indonesia in 2014. Two of the smelters will process as well as purify iron ore, bauxite will be processed in the third smelter to chemical grade alumina. Indonesia Chemical Alumina is the owner of these three smelters. This company, jointly owned by Japan and Aneka Tambang (Antam), operates in West Kalimantan.
Two other companies constructing smelters happens to be one foreign investment company named Delta Prime Steel and another jointly owned by Antam and Krakatau Steel. These smelters, located in West Kalimantan, will process the iron sands to sponge iron.
Mahendra Siregar, head of BKPM, ensured that a double of the existing number of smelters will be ready in Indonesia for producing ores. They have received smelter investment plans from 28 companies, including the ones that are ready for production this year. All the other 25 companies are in their construction phase.
"For the next two or three years, 25 smelters are being prepared. Three of these are bauxite smelters... The total investment value of smelter development by the 28 companies is approximately IDR 150 trillion (USD $12.4 billion)." Mahendra said in Jakarta on Tuesday. He added that it takes at least two years to build a smelter, while the costs are not small. Therefore, entrepreneurs need certainty regarding enforcement of new Mining Law No.4/2009 on Minerals and Coal Mining.
Since Jan 12, 2014 the mining law No.4/2009 has come into effect and it prohibit exporting of raw minerals. Thus it the exporters need to build smelters for creating value-added mineral products export. Though the law had already been issued in the year 2009 and the miners have got a period of five years to prepare the smelting facilities, the mining industry in Indonesia wasn’t ready for full implementation of export ban in 2014 January.
Therefore, the exporters were given an opportunity by the government to construct their smelters until the year 2017 and allowed them to export their mineral concentrates. However, they will have to pay taxes for their exports.
Earlier, Susilo Siswoutomo, Deputy Minister of Energy & Mineral Resources, admitted the government has notbeen very strict in supervision of smelters construction, resulting in development delay. To ensure they do not repeat their mistakes, the government plans to form a special team who will be responsible for constructing the smelters. Mineral concentrates export companies committed to building smelters will be required to submit a security deposit. These companies should also provide a road map for development of smelter. The government unit will monitor their commitment every month.
"They should be monitored on a monthly basis. If, for example, they do not start construction but, on the contrary, abandon their construction plans, then they will lose their deposited money." Siswoutomo said last week. Siswoutomo added 253 companies having an IUP (mining license) till now have signed a smelter development pact. Of these, only 178 have submitted their proposals for building smelters and only 112 have initiated a feasibility research. But only 28 companies have asked for permission to BKPM to begin their smelter construction work.
