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UPDATE 1-Indonesia's mining ministry looks to ease mineral export ban

Wilda Asmarini and Fergus Jensen
Wednesday, 8 Jan 2014 | 1:56 AM ET

JAKARTA, Jan 8 (Reuters) - Indonesia's mining ministry on Wednesday sought to ease a looming mineral export ban by proposing a regulation that would allow shipments of some mineral ore concentrates to continue until 2017.

However, the proposal, which must be approved by President Susilo Bambang Yudhoyono, does not include nickel or bauxite concentrate, where shipments are still due to be banned from Sunday.

Indonesian government officials are scrambling to pass regulations to ease a ban on unprocessed mineral ore exports from January 12. The ban aims to boost Indonesia's long-term return from its mineral wealth, but officials fear a short-term cut in foreign revenue that could widen the current account deficit at a time when the economy is slowing.

"The (mining) ministry proposed that miners will be given flexibility to export concentrate or processed minerals until 2017," Sukhyar, director general of coal and minerals, told reporters.

"After 2017, they will only be allowed to export metal or refined mineral," he said.

The proposal would allow U.S. giants Freeport-McMoRan Copper & Gold and Newmont Mining Corp to continue to ship copper concentrate.

Sukhyar said the two companies, which account for 97 percent of the country's copper production and currently refine only about a third of their copper output in Indonesia, would not be allowed to ship concentrate after 2017.

Under the ban, mining companies must process their ore before shipping it overseas, a measure initially passed in 2009 to boost the value of exports from Indonesia, the world's top exporter of nickel ore, thermal coal and refined tin.

The ban is part of a 2009 mining law aimed at increasing the value of Indonesia's natural exports, bolstering foreign revenue and narrow the current account deficit in the longer term.

But companies have hesitated to invest the hundreds of millions of dollars necessary to build smelters due to ample global refining capacity, low commodity prices, and Indonesia's history of backing away from controversial policies.

As a result, the ban could cause a significant decline in mineral exports for miners that do not have refining capacity.

Indonesia's central bank on Friday said the current account deficit could exceed 3 percent of gross domestic product due to the risks from lower commodity prices and the mineral export ban.

Southeast Asia's largest economy reported a current account deficit of 3.8 percent in the third quarter of 2013, easing from a record high of 4.4 percent the previous quarter.