Indonesia's new mining tax will raise coal prices

Last week's announcement by
Indonesia's government that it is considering a tax on the export of mineral
ores and concentrates has brought into focus once again the changes occurring
within the country's minerals sector.

In 2009, Indonesia passed law
4/2009 on Mineral and Coal Mining which will come into effect in 2014 and all
miners are required to process all their raw materials domestically before
export.

Analysts believe that because Indonesia is the world's
largest exporter of thermal coal, the act is certain to drive up the price of
the power station fuel.

“Electricity producers in
India and China therefore face growing problems of higher coal prices in
2012-13, before the potential withdrawal of this lower quality thermal coal
from 2014 onwards.”