Satria Sambijantoro, Jakarta – The Indonesian government said on Thursday that it would stick to its guns on the export tax for unprocessed ores, defying stern opposition and lobbying attempts from US-based mining giants Freeport-McMoran Copper & Gold Inc. and Newmont Mining Corp.

Finance Minister Chatib Basri said on Thursday that the export tax scheme was necessary to support the country's value-added industry, a statement that came a day after Freeport CEO Richard C. Adkerson paid a visit to the minister's office, holding a closed-door meeting to discuss the issue.

"This is a fiscal instrument to compel companies to build smelters – it isn't a policy for revenue collection," the minister said at an economics seminar in Jakarta.

In implementing the new Mining Law, the government will effectively ban the export of raw ores such as bauxite and nickel, among others, beginning Jan. 12, in its efforts to curb the country's dependency on raw resources by pushing miners to process the ores domestically and to export more value-added goods.

The government already made an exemption for copper ores, allowing Freeport and Newmont, which control 97 percent of total domestic copper production, to continue exporting them.

However, the reform-minded Chatib recently introduced an export tax of 20 percent for companies that process ores below their purity level, with the tax set higher at 25 percent for copper concentrates, in a policy that is seen as specifically targeting Freeport and Newmont.

The new export tax took Freeport by surprise, Adkerson said during a conference call with analysts, as quoted by Bloomberg.

However, Chatib explained that the government needed to apply a carrot-and-stick approach to ensure that the new Mining Law would be imposed consistently.

"Our experience over the last few years shows that there has been no pressure, no punishment, for mining firms to build smelters. We can not afford to repeat the same mistakes again."