Indonesia hopes four new smelters complete in 2016

Indonesia hopes four new smelters will be completed in 2016, a mining ministry official said on Wednesday, as low commodity prices continue to create financial problems for the mining industry and shrink government returns.

Indonesia banned metal ore shipments in early 2014 to encourage firms to build smelters and shift exports from raw materials to higher-value finished metals. But the ban cost the country, a major supplier of bauxite, billions of dollars in lost revenue. Dozens of smelter projects have been delayed as a result of the current downturn in commodity prices.

"In 2016 we hope four additional smelters will be operational," Coal and Minerals Director General Bambang Gatot told reporters. They will process nickel, alumina and lead. The latest figure is around half of an earlier smelter target for this year.

Indonesia's mineral export rules have been a flashpoint between the government, which is constitutionally bound to maximise returns from resources, and companies including U.S. miner Freeport McMoRan Inc.

New rules issued by the government in February allow mining companies to revise the capacity of their planned smelters, in hope of helping them build domestic processing facilities, Gatot said, adding that Freeport's $530 million smelter bond was still being discussed.

"The $530 million isn't regulated. It was just a way for us to control their seriousness," he said.

Freeport was forced to halt overseas shipments last month after the government demanded the company first pay a $530 million deposit for a smelter before it renewed the permit. The government is still reviewing the $1.7 billion price tag Freeport put on a stake in its local unit, he said.

The government's non-tax revenue from mining missed its target by 43 percent in 2015 and could remain flat in 2016, also below target, he said. ($1 = 13,265 rupiah)

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