Indonesia's Ministry of Energy and Mineral Resources (EMR) is considering granting a special royalty for low-grade nickel used in the processing of downstream products such as lithium batteries.
Earlier, the government levied zero royalties on coal miners engaged in downstream activities.
No. 3 of the Mineral and Coal Mining Law of 2020 stipulates that enterprises involved in downstream mining and coal projects can be granted postponing the mining and operation license every 10 years under special conditions until their reserves are exhausted.
Based on Government Regulation No. 81 of 2019 on Types of Government Non-Tax Revenue and Tariff Nickel Production Fees or Royalties Income is divided into three categories: Windfall Profits on Nickel Ore, Refined Nickel Products and Nickel matte Prices (if more than $21,000 per wet ton).
Royalties for refined oil products average about 2 per cent and for nickel ore can be as high as 10 per cent.
Recently, the Indonesian government estimated that nickel production would nearly triple to 71.4 million tons by 2023, and with 30 new smelters built since last year, it is expected to reach 19.31 million tons.
On September 18, Minister Arifin Tasrif signed off on the regulation, which will take effect from September 25, 2020.
According to the regulations, nickel production will reach 30.10 wet metric tons in 2021, increase to 59.94 wet metric tons in 2022 and 71.74 wet metric tons in 2023.
As nickel ore increased, so did the minerals processed.
The target for domestically processed ore is to increase from 12.77 wet metric tons in 2020 to 52.14 wet metric tons in 2024.
The proportion of nickel ore processed also increased from 66% in 2020 to 73% in 2024.
The utilization rate of refined nickel smelters such as ferro-nickel and ferro-nickel pig iron will also increase from 70 percent this year to 75 percent by 2024.
Nickel matte increased from 90 percent to 95 percent.
There are 48 smelters under construction and scheduled to be operational by 2024, of which up to 30 will be nickel smelters, said Irwandy Arif, a special staff member at the ministry.
Despite the government's optimism, the Indonesian Nickel Mining Association expects nickel production to fall 52 percent to 25 million wet metric tons this year, according to local media reports.
The fall in prices has led to a large number of miners not producing in 2019 and prices falling to low levels.
Last year, low-grade nickel production reached 52.76 million tons, up 138 percent from the 22.14 million tons produced in 2018, said UN Secretary General Maidi Katrin Lenki.
This year, the organization expects production to reach 25 million metric tons, plus capacity to meet the needs of Indonesia's 12 operational smelters.
She added that many miners had chosen not to mine since the ban because local nickel prices were still too low.
She wants the government to immediately issue binding rules on benchmark mineral prices and the imposition of sanctions.
By the first quarter of 2021, she believes, nickel supplies from several smelters will either run out or be certain to cease.
"Several smelters have been added to the production line and demand for nickel ore feedstock has increased.
There are also two new smelters starting production this year."
