Companies have struggled to export minerals from Indonesia since harsh regulations were put in place in January, creating a supply squeeze for nickel. However, two companies have now opted to start paying newly required export taxes in order to ship mineral concentrate.
Reuters reported Friday that Sebuku Iron Lateritic Ores (SILO) and Lumbung Mineral Sentosa have secured permits to ship iron ore, zinc and lead subject to a 20-percent export tax. Currently, that tax is slated to increase incrementally to 60 percent in the latter half of 2016. Indonesia implemented new rules banning the export of mineral concentrates in order to pressure miners to refine metals domestically.
SILO has now shipped 100,000 tonnes of iron ore concentrate, while Lumbung has sent 8,000 tonnes of lead and zinc concentrate out of the country, according to the news outlet. R Sukhyar, Indonesia’s coal and mineral director-general, stated, ”they finally wanted to pay it,” in reference to the tax.
Indonesia’s new mineral export regulations have also been making waves in the copper space as major miners Newmont Mining (NYSE:NEM) and Freeport-McMoRan Copper & Gold (NYSE:FCX) have so far been unable to come to an agreement about the rules with the Indonesian government. Reuters said in another Friday article that Newmont may even risk losing its mining license to a state-run miner as Indonesia is prepared to defend its case in international court.
To be sure, the news is important for resource investors to note. As well as being a leading supplier of iron ore and bauxite before the ban, Indonesia was the world’s number one nickel-exporting country, and a restart of shipments from the island nation would certainly affect the market. Since January, when Indonesia implemented its new laws, nickel prices have risen above $18,000 per metric ton, with China going so far as to get around the ban by purchasing ore with lower nickel and higher iron content labeled as “iron ore.”
In terms of whether the ban will actually be lifted, a Bloomberg article from July 9 suggests that Joko Widodo, Indonesia’s new, more market-friendly leader, may ease the harsh export rules. Mike Dragosits, senior commodity strategist at TD Securities in Toronto, told the publication, “[t]hat signals to us that he’ll probably relax the country’s ore export ban. His hand will basically be forced by the fact that the Indonesian economy has been suffering under this ore export ban regime.”
However, as Nickel Investing News has previously explored, the Indonesian ban is not the only factor at play for the metal. Russia’s Norilsk Nickel (MCX:GMKN) is the world’s single largest nickel producer, and it also influences the market. Kitco News reported last week that although increasing sanctions on Russia have yet to affect the metals producer, another increase in sanctions last week renewed supply fears on worries that Norilsk will eventually be affected.
For now, of course, ban has yet to be lifted, and any exports from Indonesia will remain subject to hefty tariffs. In that light, nickel investors may want to keep an eye on the situation in the island nation, as well as nickel-focused companies operating outside of Indonesia and Russia.
North American Nickel (TSXV:NAN) currently has two exploration projects: a nickel-copper-cobalt-PGMs project in Greenland and a copper-nickel-PGMs project in Ontario, while PolyMet Mining (TSX:POM,NYSEMKT:PLM) and Duluth Metals (TSX:DM) are both exploring for polymetallic deposits in Minnesota’s Duluth Complex. Polymet is advancing its wholly owned, advanced-stage NorthMet nickel-copper-precious metals project, while Duluth is focused on its Twin Metals copper-nickel-cobalt-platinum–palladium–gold–silver project.
Additionally, Balmoral Resources (TSX:BAR) is assessing the base metal potential of its Grasset gold discovery in the Abitibi greenstone belt. Follow-up drill testing intersected a previously unknown occurrence of nickel-copper-PGMs mineralization grading 0.5-percent nickel, 0.1-percent copper, 0.33 grams per tonne palladium and 0.15 grams per tonne platinum.
Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned.