Indonesia launches monthly benchmark price for metals

* Monthly benchmark prices for base metals to follow LME

* Benchmark price for iron ore to follow Australian price

Indonesia has launched monthly benchmark prices for key base and precious metals to be in line with international markets, as the resource-rich country seeks to boost revenue from the mining sector, the energy ministry said on Wednesday. 

Under a new mining and coal law, miners must sell coal and minerals based on monthly government-set price benchmarks. The government has applied coal price benchmark since early 2009. 

"The benchmark prices will prevent miners from selling minerals cheaply," Bambang Setiawan, director general of coal and minerals at the energy and mineral resources ministry, told Reuters. 

The government will set monthly benchmark prices for exports of copper, tin, nickel, aluminium, lead, zinc, gold, silver, platinum and palladium, the ministry said in a statement on its website. Currently, companies set prices individually based on agreement with buyers. 

Benchmark rates for copper, tin, nickel, aluminium, lead and zinc will follow prices at the London Metal Exchange (LME) while benchmark prices for precious metals will follow prices at the London Bullion Markets Association. 

For iron ore and iron sands, prices should follow those in Australia as the world's top iron exporter, it said.

It was not immediately clear how the benchmark regulation will affect sales from miners including copper sales from the Indonesian unit of Freeport McMoran Copper & Gold and Newmont Mining Corp . 

But miners who hold contract of works-type of mining license, can still use the price formula stated in their agreements while awaiting the ministry's decree to formalise the benchmark, the ministry said. 

It was not clear when the decree will be issued, but holders of other types of mining licenses may be immediately impacted by the new benchmark price ruling.

Officials from PT Freeport Indonesia, which operates the massive Grasberg copper and gold mine in Papua, and PT Newmont Nusa Tenggara, which operates the Batu Hijau copper mine in Sumbawa island, could not be reached for comments. Both Freeport and Newmont hold contract of works licences. 

Indonesia's efforts to raise its revenue from coal and minerals come as the nation's oil revenue has declined due to ageing oil wells and a lack of investment.

In the case of coal, the price reference so far is only for the government and miners to calculate non-tax revenue, including royalties. 

However, miners must comply with the monthly price reference when calculating actual coal selling prices for spot and long-term sales in overseas and domestic markets. Source: Reuters