Found this article on explaining exporting of unprocessed...

Found this article on explaining exporting of unprocessed minerals in Indonesia.

Considering Gulf have now divested 25% to Indonesian investors and have now made significant progress with the smelting hub with the arrival of 2 initial smelters surely the DSO approval should be around the corner.



GR1 of 2014 and the now-revoked MEMR Regulation 1 of 2014 were issued with the purpose of regulating the export ban on unprocessed minerals and ores, which took effect from 12 January 2014. The regulatory package also included regulations from the Ministry of Trade regulating the export mechanism, and the Ministry of Finance, regulating export duties. GR1 of 2014 and MEMR Regulation 1 of 2014 essentially set out that certain minerals such as copper, iron ore, ilmenite, lead, manganese and zinc concentrates may be exported without being fully refined until 10 January 2017, provided the mining company met minimum levels of processing and also secured a recommendation from DGMC and Minister of Trade (MoT) approval, and export of nickel, bauxite, tin, gold, silver and chromium ore or concentrates was prohibited, so that these minerals had to be fully refined before export.
After several amendments and revocations to MEMR Regulation 1 of 2014, MEMR recently issued Regulation 25 of 2018 (as defined above), which, among other matters, regulates increasing the added value of minerals through domestic processing and refining activities. According to MEMR Regulation 25 of 2018, from 3 May 2018 until 11 January 2022, CoW, IUP and IUPK holders may export certain exempted partially processed minerals, subject to satisfaction of a set of stringent conditions, including a minimum level of processing, obtaining a recommendation from DGMC, an export approval from the MoT and payment of export duties. CoW holders may no longer export certain exempted partially processed minerals unless they have converted their CoW into an IUPK (and satisfied the conditions for an IUPK holder, including divesting 51 per cent of its shares to Indonesian shareholders by the 10th year of commercial production).
The new regulations also provide that until 10 January 2022, a holder of a production operation IUP or production operation IUPK (including conversion from a CoW) may export ore with:

• a nickel content of less than 1.7 per cent, and only if they have ‘used’ 30 per cent of their own smelting capacity input for domestic purposes; and
• a washed bauxite content of at least 42 per cent, subject again to stringent conditions, including the construction of a refining facility (either by itself or together with others), and obtaining a recommendation from DGMC and export approval from the MoT.

The new regulation also dictates that in order to obtain a recommendation from DGMC, the production operation IUP or IUPK holder, among other actions, must demonstrate progress on the development of the refining facilities. The production operation IUP or IUPK holder must also submit a verified processing and refining facility construction plan and an independent verifier’s report on the processing and refining facility construction status. In order to maintain the recommendation, the production operation IUP or IUPK holder must also submit to biannual reviews, during which it must prove that, among other matters, the construction rate of the smelter facility is at least 90 per cent of the agreed rate, failing which DGMC will recommend to the Director General of International Trade to revoke the relevant export approval and impose an administrative penalty in the amount of 20 per cent of the accumulated value of exported minerals.
Similar to the previously revoked regulations, MEMR Regulation 25 of 2018 also provides that the holder of an exploration IUP, production operation IUP or IUPK or production operation IUP specifically for processing and refining, may carry out research and development for an ‘establishment and development plan’ in relation to domestic processing and refining activities. Such holders may cooperate in relation to research and development with the following:

• a research and development institution under the auspices of MEMR;
• other competent research and development institutions;
• universities; or
• foreign parties (for research and development that cannot yet be carried out domestically and for the purpose of assessing the suitability of certain technology for domestic usage).

Domestic market obligation (DMO)
The Mining Law and regulations contain DMO provisions, which control the levels of production and export of minerals and coal. CoWs or CCoWs contain similar provisions.
The Mining Law and MEMR Regulation 25 of 2018 regulate most aspects of the DMO including the minimum percentage of coal and the price at which coal mining companies must sell coal to the domestic market.
Letter of credit (LC) for export payment method
On 5 January 2015, the MoT issued Regulation 4 of 2015 as amended by Regulation 67 of 2015, which stipulates that payment for exported minerals and coal must use an LC to be settled in a bank licenced to operate in Indonesia and deal in currency exchange. The LC requirement became effective as of 1 April 2015.
However, companies that are not yet able to use an LC for the payment method may request an exemption from the Ministry of Trade, as regulated under MoT Regulation 26 of 2015.

Cheers