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fter having slapped steep duties on semi-processed mineral exports, the government plans to compound the woes of miners by requiring they put up a deposit as a guarantee to build domestic smelters in the near future.

The director general of mineral and coal at the Energy and Mineral Resources Ministry, R. Sukhyar, said Thursday that his office planned to amend a ministerial decree to carry out the plan.

He said companies would be forced to front 5 percent of the total cost of smelter construction.

'€œThe money will be put in local banks and held for up to three years. We will observe the progress [of the construction]. When it is completed, we will return the money,'€ Sukhyar said.

The financial guarantee, more commonly called a surety bond, is part of the government'€™s implementation of the 2009 Mining Law, which requires mining companies to process ore in domestic smelters before export. As a consequence of the law, on Jan. 12 it became illegal to sell raw ore overseas.

According to deputy chairman of the Indonesian Mining Association (IMA) Tony Wenas, the surety bond went beyond what the law allowed for and would be rejected by the country'€™s mining industry.

When it was passed, the Mining Law gave mining companies five years to build smelters '€” however, most of them failed to do so, saying it was not economically feasible and that the government had failed to provide supporting infrastructure such as electricity supply.

Weighing the massive layoffs and losses in state and corporate revenue full implementation of the law would cause, the government issued an exemption allowing certain miners to continue exporting semi-processed minerals until the end of 2016 '€” with a progressive export duty of 20 percent to 60 percent attached.

Mining giants Freeport Indonesia and Newmont Nusa Tenggara have vehemently opposed the duty, saying that besides being unrealistically high, it violated their contracts of work (CoWs). They have indicated they would take legal action to ensure continued export of their copper concentrates without the duty.

Coordinating Economic Minister Hatta Rajasa said the export duty was non-negotiable.

'€œWe are not looking for money from the export duty. We are forcing them to build smelters. We are implementing the law. Freeport and Newmont must build smelters,'€ Hatta said.

Energy and Mineral Resources Deputy Minister Susilo Siswoutomo said he had received a letter from Newmont stating that the company would take the case to international arbitration.

'€œThe decision has been made. It cannot be challenged by anyone. We would rather break the CoW than the law. Go ahead with your plan to bring it to arbitration,'€ he said in an address to a meeting of regents, governors and heads of mining and energy bureaus nationwide.

'€œThere is no negotiation anymore. But they [companies] can come to us to ask for tax allowances to build the smelters,'€ he said.