New Regulation on Mineral Ore Benchmark Price Issued

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 253.Pers/04/SJI/2020

New Regulation on Mineral Ore Benchmark Price Issued

Ministry of Energy and Mineral Resources (EMR) asserts that an improved regulation which determines Mineral Ore Benchmark Price (HPM) will boost the growth of domestic nickel market and make sure that nickel ore sales comply with market price.

Acting Director General of Mineral and Coal Rida Mulyana said the issuance of HPM as stated in EMR Ministerial Regulation Number 11 of 2020 on Third Amendment to EMR Ministerial Regulation Number 07 of 2017 on Procedure to Determine Sales Benchmark Price of Metallic Mineral Ore and Coal is intended to accommodate the needs of both nickel miners and smelter business people.

"(The government's duty is) how to find the balance or fair price between profit for smelters and a guarantee that nickel mining activities give enough margin to miners," Rida explained in a virtual press conference in Jakarta on Monday (20/7).

In the regulation, continued Rida, the government set the HPM below international price to increase the economies of scale of smelters. "The HPM is the bitstock price for smelter price. The lower the HPM is, the more economical the smelters are. We always set the HPM below international market price," he said.

Director of Mineral Fostering and Enterprise of DG Mineral and Coal, Ministry of EMR, Yunus Saefulhak, gave an illustration of the HPM setting below international price. "For example, if international price is USD60 (per Wet Metric Tonne), our (Indonesia) price is USS30 (per WMT) at the most," explained Yunus.

However, the HPM will always be set below mining costs or expenses needed to produce or mine nickel ores.

The government believes the HPM regulation will create an investment climate that is conducive for smelters and miners. "The HPM is aimed to make a fair, competitive, and transparent trade system in the mineral and coal subsector for both miners and smelter business actors," said Yunus.

The HPM formula is set by Minister of EMR and made up of metallic mineral value/content; constant or corrective factor; Mineral Reference Price (HMA); treatment costs and refining charges (TC/RC), and/or payable metal.

Rule Changes

There are several main points in EMR Ministerial Regulation 11/2020. One, the HPM and the Coal Benchmark Price (HPB) are set by considering international market, added value increase, and good mining practices.

Two, the nickel ore HPM is set as floor price. Transactions can be made below this price, with a difference of not more than 3 percent, to anticipate different price quotes or penalty for impurities, for example Fe and Mg contents exceeding the standards.

Three, in purchasing nickel ores, other parties must refer to the HPM. Four, tin price publication also refers to the Jakarta Future Exchange, from previously only referring to the Indonesia Commodity and Derivative Exchange (ICDX).

Five, the HPM and the HPB formula will be set monthly in an EMR Ministerial Decision. Six, quality and quantity verification in the field must be made by an executing surveyor, who will issue a Report on Verification Results (LHV).

Seven, DG Mineral and Coal appoints surveyors, who will act as an authenticator of mineral and coal sales in the field.

Eight, sales carried out in the country must have a surveyor who will act as an umpire if there are any analysis differences in the mineral quality between seller and buyer.

Nine, the HPM and the HPB formula set out in the Ministerial Regulation can be reviewed every 6 months. "So, for example we issue the formula in February, plus 6 months, so evaluation will be made in October," Yunus concluded.

The HPM set out in Ministerial Regulation Number 11 of 2020 will be evaluated every 6 months by considering various aspects and inputs from stakeholders which will become the basis for making any changes. The Ministerial Regulation was issued on 14 April 2020 and becomes effective 30 days from its issuance date, or from 14 May 2020. (IY)

Head of Bureau of Communication, Public Information Services, and Cooperation

Agung Pribadi (08112213555)

Share This!