REPUBLIKA.CO.ID, JAKARTA -- The government is studying Government Regulation in lieu of Law (Perppu) No.4/2009 on Coal and Mineral Mining in order to solve the problem of companies that are required to build smelters.

Energy and Mineral Resources Minister Sudirman Said told a hearing with Commission VII of the House of Representatives (DPR) here on Tuesday that the Perppu could serve a solution to the problem of companies which were required to process and purify their mining products at home.

"After we look at it, we found that Government Regulation and the Minister's Regulation do not match the law," the minister said.

The law on coal and mineral mining regulates that companies are required to process and purify their mining products at home.

With the requirement, firms are not allowed to export their mining products before they purify them at home.

However, the lower regulations such as the government regulation and the minister's regulation allow the companies to export their products which had been processed in the form of concentrate although they have not yet been purified.

These regulations enable PT Freeport Indonesia and PT Newmont Nusa Tenggara to export their concentrate, copper, gold and silver products.

They are now allowed to carry out such an export after seeing the progress of their smelter development and their export tax payments.

The license for export is also limited, and given only until 2017. After 2017, the mining companies' obligation to process and purify their products will be come a must, the minister said.

In the meantime, the plan to build a copper concentrate smelter in Papua will need US$1.5 billion, the provincial mining and energy office said.

The cost will include land clearing, head of the regional mining and energy office Bangun Manurung said.

At a meeting on Dec 23, 2014, the government asked PT.Freeport Indonesia, the copper mining company in Papua, to build the smelter in Timika, Papua.

"PT.Freeport has been ordered to build the smelter in Papua," Bangun said, adding, the smelter is expected to be operational in 2020.

The fact that supporting facilities like fertilizer and cement factories are not available in Papua is not reason for not building the smelter "as facilities would also be built," he said.

He said Papua Governor Lukas Enembe is set to make Timika an industrial district that fertilizer and cement factories would be built there.

"There is no reason for PT.Freeport not to build the smelter in Timika, to process its own copper," he added.

The US company has pledged to build the smelter as a condition for to be allowed to export copper concentrate.

The government has issued a law banning exports of mineral ore necessitating construction of smelter to process ores before being exported.

In July 2014, the government licensed Freeport to export 756,300 tons of copper concentrate until January this year on condition it is to build a new smelter in Gresik, East Java.

The smelter in Gresik is to be operational in 2017 to be followed with one to be built in Papua to be operational in 2020.

The license would be cancelled on Jan. 25 if Freeport failed to show that it has taken a concrete steps toward realization of the plan, according to memorandum of understanding signed earlier between the company and the government.

Energy and Mineral Resources Minister Sudirman Said expressed disappointment at Freeport failing to build the copper smelter.

The company has not even decided where the smelter is to be built, the minister said.

He said he believed the company, which is the largest copper and gold producer in the country, is financially capable of building the smelter.

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