Investment in Indonesia’s mineral refining and processing sector: value-added regulations and industrial policy

On 6 February 2012, Indonesia’s Minister of Energy and Mineral Resources promulgated Regulation No. 7 of 2012 ("MEMR Reg. No. 7/2012") on increasing the value of minerals through the activities of mineral purification and processing.  This regulation, which applies to metals (such as bauxite, copper, gold, iron, nickel and tin), non-metal minerals and rocks (but not to coal), implements the requirement of Law No. 4 of 2009 on Mineral and Coal Mining ("2009 Mining Law") that mining companies process minerals and coal domestically prior to export.  Due to concerns voiced from both mining companies and trading partners, the implementation of the ban on unprocessed exports – originally scheduled for 6 May 2012 – has been deferred until 2014, so long as the proposed exporter can fulfil certain conditions.  These conditions – provided in Regulation No. 11 of 2012 ("MEMR Reg. No. 11/2012") and related regulations promulgated by the Director General of Minerals and Coal and the Minister of Trade – are intended, among other things, to prevent ore exports by illegal miners.  Reportedly, smaller Indonesian mining operations, which operate pursuant to a mining business license (izin usaha pertambangan or "IUP"), have been the most immediately affected by these new requirements (although "Contracts of Work" are potentially affected as well).

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