Rusal plans an alumina refinery in Indonesia to comply with country's new mineral laws

United Co.Rusal PLC, the aluminium producer, accepted the controversial move of Indonesia to restrict mineral ore export and said it will build an alumina refinery complying with the new laws of the country. The laws have already raised many a concerns among the global mineral competitors. But Oleg Deripaska, Rusal Chief Executive, said the stable economy of Indonesia would enable it to make a transition from mining to higher-value processing.

"I understand the government is now facing pressures, but I truly believe this law is a win-win and beneficial in the long run for the country," Mr. Deripaska said.

There are many small local mining companies who have pressurized the government to relax the mining rules bringing in focus the lack of financial resources as well as potential of a number of lost jobs.

Though the mineral export law was issued in the year 2009, their slow implementation gave an idea that the government wouldn't implement them. It took effect in January and companies are now realizing that the government is serious, Mr. Deripaska said.

The ban will help to cut down the environmental costs. This is due to the fact that small mining companies will curb their production and even support weak prices of aluminium in the medium term by bringing down their global supply of ores, Mr. Deripaska said.

He warned that tight supply of aluminium in the market could also push delivery premiums, making the buyers pay extra cost to have the aluminum delivered, above $500 a ton by second quarter’s end from the current price of $400-$450 a ton.

That growth rate of aluminium represents 3.5 million tons of demand for the metal m, Mr. Deripaska said, part of the reason that Rusal signed a MoU to create a joint venture with Indonesian company Arbaya Energi for developing a processing facility which will turn bauxite into alumina.