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UPDATE 2-Nickel miners rise on Indonesia ban as govt pledges export tax

Wilda Asmarini
Monday, 13 Jan 2014 | 1:01 AM ET

* Indonesia says will use export tax to encourage processing

* Nickel price, miners rally on potential export ban impact

* Freeport halts copper exports to await clarity on rules

(Recasts, adds new export tax, updates share movements)

JAKARTA, Jan 13 (Reuters) - Global nickel prices and mining shares rallied a day after Indonesia banned unprocessed mineral exports, as the Southeast Asian nation pledged to introduce a progressive export tax to encourage domestic smelting for a range of ores.

Indonesia introduced the controversial ban on Sunday on a range of raw mineral ores in order to force home companies to build processing plants, but policy uncertainty remains.

Last minutes changes approved by President Susilo Bambang Yudhoyono - aimed at minimizing any short-term economic pain - appear to give a reprieve to exports of copper by U.S. mining giants Freeport McMoRan Copper & Gold and Newmont Mining Corp.

Freeport has halted copper exports from its Grasberg mine and said on Monday it was awaiting government approval to resume shipments. Freeport Indonesia CEO Rozik Soetjipto told Reuters on the weekend he believed the company, which processes only about a third of its output, would be allowed to continue shipping copper concentrate.

Indonesian authorities offered no such relief to the nickel and bauxite industries, sparking a rally in the long-depressed nickel price as well as gains for miners.

Indonesia is the world's biggest exporter of nickel ore, as well as refined tin and thermal coal, and home to the fifth largest copper mine and top gold mine.

London Metal Exchange nickel rose 4 percent on Friday and added a further 2 percent on Monday, helping push up shares of Indonesian nickel miner PT Vale Indonesia by 6 percent and state-owned PT Perusahaan Perseroan Aneka Tambang (Antam) by more than 2 percent.

"The ban on the export of raw minerals is actually good, because it would reduce the supply of minerals to the global market, and is expected to raise prices," said Arandi Nugraha, commodities analyst at Batavia Prosperindo Securities.

PT Vale Indonesia is not affected by the ban as it already processes its nickel into nickel-in-matte, an intermediate product, but hundreds of small firms which simply ship low-grade ore will be hit by the ban.

Among other nickel miners, Australia's Western Areas rose nearly 9 percent, while the Philippines' Nickel Asia Corp. was up 4.6 percent by 0530 GMT.

Nickel may rise further, but a break above $15,000 a tonne - which has capped its trading band for the past six months - could be a sell signal, a Singapore-based metals trader said.

"Looking at the price action, the market is scared so I'd rather not go against it. I think $14,500 soon is not an issue at all, or maybe even $15,000 - but $15,000 is resistance," he said.

EXPORT TAX

News that Indonesia had watered down its mineral ore ban to limit any sharp fall in export revenue, helped push the rupiah up more than 1 percent to 12,020 per dollar, its strongest since Dec. 12.

Releasing further details of the policy, the mining ministry said on Monday that Indonesia will regulate mineral concentrate exports through a progressive tax under the new regulation signed by the president on Saturday.

The tax, which will increase up until 2017, will be aimed at forcing mining companies to start building smelters and refineries for copper, iron ore, lead, zinc and manganese concentrate, said Sukhyar, director general of coal mines and minerals at the energy and mines ministry.

"It will be controlled through a (progressive) export tax," he told Reuters.

Sukhyar also said there were no time limits in the new regulations, contradicting officials who said earlier in the week that such exports would only be allowed until 2017.

It was not clear whether nickel or bauxite exports would be included in the tax. Details of the presidential regulation have yet to be released.

The nickel price, wallowing not far from four-year lows, had earlier failed to react to the looming ban because of a global oversupply and scepticism over whether Indonesia would implement the controversial policy.

Indonesia accounts for about 15 percent of global nickel supplies. It is a major supplier to China where its high grade laterite nickel, found only in tropical regions, is used to produce nickel pig iron, a cheaper alternative for making stainless steel than high-purity nickel.

China requires around 850,000 tonnes a year of nickel -- nearly half global consumption -- with around 450,000 tonnes of that coming from nickel pig iron.

In Indonesia, the ban has already led to the lay-off of almost 30,000 mine workers as mines cut back operations, according to the Indonesian Mineral Entrepreneurs Association, as well as a halt in some shipments.

Mine lay-offs have already sparked protests in Jakarta and thousands more could see the export ban become a hot political issue in 2014's legislative and presidential elections.

(Additional reporting by Eveline Danubrata and Andjarsari Paramaditha in Jakarta and James Regan in Sydney; Editing by Ed Davies and Richard Pullin)

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