Govt may lower royalties for miners involved in downstream industry

The government is considering imposing lower royalties on mining companies involved in ore processing in order to promote downstream industry in the country?s mining sector.

Bambang Setiawan, the director general of mineral coal, geothermal at the energy and mineral resources ministry said in Jakarta on Thursday that such an incentive would be needed so that more mining companies would have their own processing facilities in the country.

?The incentive is needed so that more miners will be engaged in downstream operations such as the processing and purification of minerals,? he said. ?At present, only a few companies are involved in downstream activities due to large investment requirement, and low return on investment (ROI),? he said.

At present, miners who are involved in downstream industry pay the same royalty rate with those who don?t have downstream operations.

Bambang said that a lower royalty rate can be given to those involved in the processing and purification of nickel, and manganese. ?For copper, I think it is not necessary because it does not need much money to turn copper into calcium carbonate,? he said.

"As far as gold is concerned, I think it is not necessary either because the downstream operation of the business has so far been running well," he added.

Currently, the government through the Ministry of Energy and Mineral Resources has accelerated the implementation of value adding program in the mining sector to meet the deadline set in the law.

The law stipulates that mining companies will not be allowed to export ore starting 2014. Instead, they have to process and refine their products in local smelters.

The ministry was preparing a ministerial decree to accelerate downstream development in the mining sector. The decree is expected to be issued in November this year. (*)