Indonesia jumps on the mining exports tax wagon

Cecilia Jamasmie | May 3, 2012 | 2:38 pm Base Metals Energy Precious Metals Asia Europe Coal Copper Gold 

Indonesia has decided to have its mining cake and eat it too, as the country, one of the world’s largest exporters of copper and coal, will start imposing a 20% tax on mining exports beginning next week.

Although lower than the 25% expected, the new tariff will have an impact on 14 mineral ore exports including copper, gold and nickel. The tax won’t apply to coal, but mining minister Jero Wacik told Reuters he was open to the idea in the future.

The mining tax comes just a few weeks after the country surprised the global mining community with a new rule, Government Regulation No. 24 of 2012, which compels all foreign mining companies to sell majority stakes in their mining operations to locals.

The government of Indonesia, southeast Asia’s largest economy, claims the tax is meant to help boost the domestic economy.

International miners with local operations, such as Brazil’s Vale SA (NYSE: VALE) and Freeport McMoran Copper & Gold Inc. (NYSE: FCX), won’t be happy. Neither will be foreign trading partners and energy-hungry nations, such as India.

Concerned with the effect the imposition on a coal tax will have on its country, India’s coal secretary, Alok Perti, said in early April “the government will take this up with Indonesia.”

Indonesia, with a population of 240 million, is the world’s premier thermal coal exporter and also a tin powerhouse.

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