IMPLEMENTATION OF MEMR REGULATION NO.

7/2012 RELATED ENHANCEMENT OF MINERAL ADDED VALUE THROUGH MINERAL PROCESSING AND REFINING ACTIVITY

Jakarta, June 2012

DIRECTORATE GENERAL OF MINERAL AND COAL

MINISTRY OF ENERGY AND MINERAL RESOURCES

Table of Contents
I. PREFACE.......................................................................... ...................................... 3 II. MAIN POINT OF MEMR REGULATION NO 7/2012............................................. 10

III. CURRENT CONDITION....................................................................... .................... 15 IV.FOLLOW UP...................................................................................... ....................... 21 V. REQUIREMENTS FOR RECOMMENDATION OF REGISTERED EXPORTER & EXPORT

I.

PREFACE

I. PREFACE
I.1. Problem Background
1. Mineral and coal is non-renewable resources that must be managed by state government, then the management should provide added value for national economic to achieve prosperity and welfare of the people. 2. To reach the goal in point 1 above, so the management of mineral and coal mining must give benefits, fairness and balance, as well as alignments to the interests of the nation. 3. Based on regulation that stated in Law Number 4 Year 2009 about Mineral and Coal Mining, theres an obligation in increasing the value-added of mineral and coal through local processing and refining industry.

I. PREFACE (Continued)
I.2. TIMELINE OF MINERAL PROCESSING AND MEMR Regulation No 7/2012 REFINING th
Feb 6 2012
Government Regulation No 23/2010 Feb 1st 2010 Law No 4/2009 Jan 12th 2009 National IUP Reconciliation May 3rd 6th 2011 Due Date for IUP OP and Contract of Work holders in Operation Production Activity Stage Januari 12th 2014

Mineral Processing and Refining in Local Inventory of processing Industry and refining facilities plan MEMR Regulation No 11/2012 May 16th 2012 _ Certainty of supply Feb 2010 Jan 2012
Government Regulation No 52/2011

(Tax Facilities) Dec 22nd 2011

_ Development of upstream industry _ Research and developmen

Nickel Ore Export (Million Ton)

Added value from ore into metal is 19 X

Rare earth minerals :

Scandium, Lantanum, Yttrium

Policy strategy:
Synchronization with the laws and regulations. Apply DMO regulation to fulfill local demand of nickel/stainless steel industry.

Problem:
There are big numbers of nickel ore export in 2011 (33 million tonnes), that increases for 800% compared to year of 2009 when Law No 4 Year 2009 released. This condition doesn
t encourage local Nickel/Stainless Steel industry.

Economic Impact:
Encourage local nickel processing industry with demand of nickel ore 18 million tonnes/year.

Iron Ore Export (Million Ton)

Added value from ore to metal is 4 X

Rare Earth Minerals : Vanadium, Titanium

Policy strategy :
Synchronization with the laws and regulations. Apply DMO regulation to fulfill local demand of steel industry.

Economic Impact: Problem:

There are big numbers of iron ore and iron sand export in 2011 (13 million tonnes), that increases for 800% compared to year of 2009 when Law No 4 Year 2009 released. This condition makes iron ore/iron sand reserves will run out in next 9 years. This condition doesn
t encourage local steel industry. Encourage local iron ore/iron sand processing industry (sponge/pig iron) that has capacity for 9,5 million tonnes/ye a r , with estimation of investment is about USD 1 billion.

Copper Ore Export (Million Ton)

Rare earth minerals : Platina, Paladium, Selenium, Telurium

Policy Strategy :
Synchronization with the laws and regulations. Apply DMO regulation to fulfill local demand of steel industry. Problem : There are big numbers of copper ore export in 2011 (14 thousand tonnes), that increases for 800% compared to year of 2009 when Law No 4 Year 2009 released. Capacity of local processing and refining industry (copper cathode) only absorbs about 30% of total concentrate production. 0,01% concentrate that has precious metals has been processed outside the country.

Economic Impact:
Encourage local processing and refining industry that process copper concentrate into copper cathode with capacity 425 thousand tonnes/year with estimated investment about USD 1,4 billion. Increase competitiveness of copper downstream industry that produce wires, PCB, and another electronic components.

Bauxite Ore Export (Million Ton)

Added value from ore to metal is 30 X

Rare earth minerals : Titanium, Tantalum, Scandium, Lantanum, Yttrium)

Policy strategy :
Synchronization with the laws and regulations. Apply DMO regulation to fulfill local demand of Alumina industry.

Problem :
There are big numbers of bauxite ore export in 2011 (40 million tonnes) that increases for 500% compared to year of 2009 when Law No 4 Year 2009 released. This condition makes bauxite reserves will run out in only 4 years and this will not encourage local alumina industry.

Economic impact:
Encourage local processing and refining industry that process bauxite ore into Alumina with capacity 7 million tonnes/year, with estimated investment about USD 8,4 billion Demand of Alumina from PT. INALUM in about 500 thousand tonnes/year can be supplied locally.

II.

MAIN POINT OF MEMR REGULATION NO. 7/2012

II. MAIN POINT OF MEMR REGULATION NO. 7/2012

II.1. Mineral Added Value Procedures
Processing Metallic Mineral

Refining Non-Metallic Mineral

Processing Rock Mineral

II. MAIN POINT OF MEMR REGULATION NO. 7/2012 (Continued)

II.2. Implementation of Mineral Added Value
Own the Plant IUP OP Cooperation Processing and Refining IUP OPK

Third-Party IUP/IUPK OP

Selling Ore/Concentrate

Processing and Refining Activity

Build Infrastructure

II. MAIN POINT OF MEMR REGULATION NO. 7/2012 (Continued)

II.3. Implementation of Mineral Added Value
IUP/IUPK Exploration due to feasibility study, is not profitable to do processing and/or refining activity or cant create a joint operation project and/or cooperation, should consult to Director General. Based on the results of consultation, Director General can nominate another IUP/IUPK Production Operation and/or IUP OPK Processing and Refining to process and refine those commodities as long as meet its specifications and its capacity.

II. MAIN POINT OF MEMR REGULATION NO. 7/2012 (Continued) IV.4. Implementation of Mineral Added Value
(continued)

Director General can facilitate IUP Production Operation, IUPK Production Operation, and/or IUP OPK Processing and Refining to accomodate ore/concentrate from another IUP Production Operation, IPR, IUP OPK Transport and Sale that is not profitable to do their own processing and refining activities, as long as meet its specifications and its capacity.

III.

CURRENT CONDITION

III. CURRENT CONDITION

III. 1. Mineral Metal Resources dan Reserves

Source: Geology Agency, 2010

III.2. STATUS OF IUP

TOTAL IUP 10.361

III. CURRENT CONDITION (Continued)

IUP C&C 4.496 IUP NON C&C 5.865

III.2.1. Status OF IUP (I,II,III, and IV announcement) - 31 May 2012 update

III.2.2. Discription of IUP C & C of 31 May 2012 IUP TOTAL TOTAL MINERAL 2.688 4.496 COAL 1.808

III.2.3. Discription of IUP Non C & C of 31 May 2012 IUP TOTAL TOTAL MINERAL 4.015 5.865 COAL 1.850

III. CURRENT CONDITION (Continued)

III.2.4. Recapitulation of IUP Minerals Per Activity Phase (update 31 May, 2012) NO 1 2 IUP PHASE EXPLORATION OPERATION PRODUCTION TOTAL TOTAL IUP 2.879 3.824 6.703 IUP C&C 1.090 1.598 2.688 IUP NON C&C 1.789 2.226 4.015

III.2.5. Recapitulation of IUP Coal Per Activity Phase (update 31 May, 2012) NO 1 2 IUP PHASE EXPLORATION OPERATION PRODUCTION TOTAL TOTAL IUP 2.410 1.248 3.658 IUP C&C 1.063 745 1.808 IUP NON C&C 1.347 503 1.850

III. CURRENT CONDITION (Continued)

III.3. Recapitulation of Processing & Refining Plan Document 1. PROCESSING & REFINING EXISTING : 7 (Update 31 May, 2012) COMPANY 2. PROCESSING & REFINING PROPOSAL BEFORE MEMR REGULATION NO 7 YEAR 2012 : 24 COMPANY 3. PROCESSING & REFINING PROPOSAL AFTER MEMR REGULATION NO 7 YEAR 2012 : 126 COMPANY TOTAL : 157 COMPANY

III. CURRENT CONDITION (Continued)

III.4. Recapitulation of Consultation Request (update 31 May 2012)
No 1 Certificate C&C Request 2 Certificate C & C that have been published 3 Requesting of Recommendation of Registered Exporter 4 Recommendation of Registered Exporter that have been published 5 Recommendation of Approval Export Letter that have been published Request Amount 76 55 156 46 2

IV. FOLLOW UP

IV. FOLLOW UP
IV.1. Follow Up of MEMR No. 7/2012

Minister of Trade Regulation No. 29/M-DAG/PER/5/2012 regarding Export Mining Product Regulation (7 May, 2012)
MEMR No. 11 Year 2012 regarding Amendment of MEMR No. 07/2012 about Enhancement of Mineral Added Value Through Processing and Refining Activity (16 May, 2012)
Minister of Financial Regulation No. 75/PMK.011/2012 regarding Determination of Export Goods for the applied duty and duty tariff. (dated 16 May, 2012)
Director General Regulation No. 574.K/30/DJB/2012 regarding Procedures and Requirement of Export Recommendation for Mining Product (11 May, 2012)

IV. FOLLOW UP (Continued)

IV.2. MEMR No. 11/2012

In order to improve effectiveness of control implementation of sales mineral out of the country, need to change regulation about enhancement of mineral added value through processing and refining activity. Therefore at 16 May, 2012 Government has issued MEMR No. 11 Year 2012 regarding Amendment of MEMR No. 07/2012 about Enhancement of Mineral Added Value Through Processing and Refining Activity.
Main Point of MEMR No. 11 Year 2012 are between Article 21 dan Article 22 inserted 1 (one) Article, namely Article 21A, as follows: (1) IUP Operation Production Holder and IRP referred to in Article 21 can sell ore (raw material or ore) minerals out of the country if has receiving recommendation from the Minister cq DirectorGeneral. (2) Recommendation reffered to in paraghraf (1) be given after IUP Operation Production Holder and IPR reffered to in paraghraf (1) fulfil criteria such as : a. status of IUP Operation Production and IPR are Clear and Clean; b. Payment all financial obligation to the state; c. submit a work plan and / or cooperation in processing and / or refining of minerals in the country; and d. signing the integrity pact.

V.

REQUIREMENTS FOR RECOMMENDATION OF REGISTERED EXPORTER & EXPORT APPROVAL

Q
V.1. Requirement for Recommendation Registered Exporter IUP OP metallic mineral, non metal, rocks, with requirement : Recognation
1) copies of certificate C&C; 2) integrity pact; 3) memorandum of understanding with other IUP Operation Production or IUP Operation Production Special for processing and refining if doing cooperation; 4) work plan establishment processing and refining facility own and/or cooperation processing and refining facility in the country; 5) copies of sales contract of mining product with end user; 6) copies of Tax Payer Identification Number; and 7) copies of company registration mark. IUP Operation Production Specially for transportation and sales of mineral, with requirement : 1) Copies of IUP Operation Produktion Specially for transportation and sales of mineral; 2) cooperation agreement with the IUP Operation Production holder has signed a integrity pact to build own processing and refining facilities and / or who have had a memorandum of understanding with other IUP Operation Production or IUP Operation Production Specially for processing and refining facilities to develop processing and refining facility in the country; 3) copies of sales contract of mining product with end user; 4) copies of Tax Payer Identification Number; and 5) copies of company registration mark.

REGISTERED EXPORTER & EXPORT APPROVAL

V. REQUIREMENTS FOR RECOMMENDATION OF REGISTERED EXPORTER & EXPORT APPROVAL (Continued)

Special IUP OP of processing and refining, with requirement:

V.1. Requirement for Recommendation Registered Exporter Recognation

1) copies of IUP Operation Production Specially for processing and refining; 2) work plan to developed processing and refining facility own and/or cooperation to developed processing and refining facility in the country; 3) copies of sales contract of mining product with end user; 4) copies of Tax Payer Identification Number; and 5) copies of company registration mark.

V. REQUIREMENTS FOR RECOMMENDATION OF REGISTERED EXPORTER & EXPORT APPROVAL (Continued)

V.2. Requirement for Recommendation of Export Approval
IUP OP metallic mineral, non metal and rocks, with requirement: 1) copies of Registered Exporter of Mining Product; 2) export plan included are types and ammount of mineral commodities to be exported, tariff number/HS, port loading, and export destination; 3) data of Resource, reserve dan production; 4) copies of sales contract of mining product with end user; 5) copies of provement of reclamation guarantee placement; 6) copies of provement of payment landrent/deadrent 1 (one) year last; and 7) Copies of provement of payment royalty of metallic mineral 1 (one) year last or proff of payment tax level II for non-metallic mineral and rock in 1 (one) year last.

V. REQUIREMENTS FOR RECOMMENDATION OF REGISTERED EXPORTER & EXPORT APPROVAL (Continued)

V.2. Requirement for Recommendation of Export Approval
IUP OP Specially for transportation and sales of mineral, with requirement: 1) copies of Registered Exporter of Mining Product; 2) export plan included are types and ammount of mineral commodities to be exported, tariff number/HS, port loading, and export destination; 3) data of Resource, reserve dan production; 4) copies of sales contract of mining product with end user; 5) copies of work plan developing of processing and refining facility own and/or cooperation developing of processing refining ini the country from IUP OP and/or IPR; 6) copies of provement of payment landrent/deadrent 1 (one) year last from IUP OP or IPR and; 7) copies of provement of payment royalty of metallic mineral 1 (one) year last or proff of payment tax level II for non-metallic mineral and rock in 1 (one) year last from IUP OP or IPR.

V. REQUIREMENTS FOR RECOMMENDATION OF REGISTERED EXPORTER & EXPORT APPROVAL (Continued)

V.2. Requirement for Recommendation of Export Approval
IUP OP Specilly for processing and refining, with requirement : 1) copies of Registered Exporter of Mining Product; 2) export plan included are types and ammount of mineral commodities to be exported, tariff number/HS, port loading, and export destination; 3) copies of sales contract of mining product with end user; 4) Cooperating aggreement with IUP OP holder and/or IPR which has receive clear and clea certificate 5) copies of provement of payment landrent/deadrent 1 (one) year last from IUP OP or IPR and; 6) copies of provement of payment royalty of metallic mineral 1 (one) year last or proff of payment tax level II for non-metallic mineral and rock in 1 (one) year last from IUP OP or IPR.

SOP ET RECOMMENDATION AND EXPORT APPROVAL

No. Agenda Company
IUP/IOP OPK Registration

Director General
1 2

Director

Small team PNT

Expert team

1.

Application
Application

2.

Administration Evaluation

Notification : Data Complete Notification : Data Uncomplete 4 Original Document

Handover letter of disapproval Disapproval Letter

Administration Evaluation
No

3a 3b

Complete ? Yes

There is an additional time between notification and submission of original document 5

Official Memo & Letter Concept

2014
6 Evaluatio n

3.

Technical Evaluation

Technical Evaluation 7a
Yes Approval ? No

Plenary

4.

Recommendatio n Letter

Handover recommendation letter

Approval Letter

Official Memo & Letter Concept

7b

The issuance of Clean and Clear (CnC) certificate for the company must meet the following requirements: 1. Administration : a.No overlapping b.Permit documents 2. Technical : a.Exploration report b.Feasibility study report c.Environment document approval 3. Finace obligation : a.Fixed contribution fee b.Royalties

MERM MINISTERIAL REGULATION NO. 07/2012

24 IUP 126 IUP

The Amount of IUP Mineral 5 Comodities CnC = 283 IUP The Amount of IUP Mineral 5 Comodities NON CnC = 432 IUP

VI. CLOSING

VI. CLOSING
1. Some mineral commodities (ie nickel, bauxite, iron ore and sand iron and manganese) mostly sold out of the country in ore formed (raw material / ore). 2. To ensure the sustainability of mineral processing and refining in the country to the future, then absolute to control of mineral sales out of the country in ore formed. 3. MEMR. 7/2012 become a strong legal basis for the Government to encourage companies to increase value added through processing and refining of mineral in the country. 4. Need the support of all stakeholders to realize increased value added through the mineral processing and refining of mineral activity in the country as mandated by Law No. 4/2009.

Contact :

DEDE SUHENDRA
DIRECTOR OF MINERAL DIRECTORATE GENERAL OF MINERAL AND COAL Email : di.suhendra@gmail.com dedeida@djmbp.esdm.go.id Phone : 021- 8307557 fax : 021-83785103 Adress : Jl. Prof. Dr. Soepomo No. 10, Jakarta12870

www.djmbp.esdm.go.id