Mining in Indonesia includes a part or all stages of coal and mineral exploration and exploitation. Minerals are defined by law number 4 of 2009 on Mineral and Coal Mining (“Mining Law”) as inorganic compounds which possess specific characteristics and compositions in the form of ores. Coal is defined as sediment of organic carbon which is naturally formed from plants. Mining in Indonesia does not include any activities related to exploration and exploitation of geothermal, oil and gas and ground water.
Distribution of Mining Areas in Indonesia
The basis for determining mining activities is the so called Mining Area (Wilayah Pertambangan or WP). A WP, being part of the national spatial plan, is a specific area that potentially holds any minerals and coals which is free from any restrictions by the government. Based on article 15 of Government Regulation number 22 of 2010 on Mining Area regulates that the WP shall be determined by the Ministry of Energy and Mineral Resources after coordination with the governor, regent/mayor and the House of Representatives (DPR) of the Republic of Indonesia.
The WP can be divided into:
1. Mining Effort Area (Wilayah Usaha Pertambangan or WUP). This area is determined by the President and has already available data, potential, and/or geological information; and/or
2. Community Mining Area (Wilayah Pertambangan Rakyat or WPR). This area is determined by the mayor or regent and is used for activities related to mining efforts of the local community. Community mining efforts are activities which are carried out by local people on a small scale or in a joint effort with simple tools for their own living; and/or
3. Country Reserves Area (Wilayah Pencadangan Negara or WPN). This area is determined by the President with agreement of the House of Representatives and is reserved for the use of strategic national interest (specific commodities and environmental protection). A Country Reserves Area that can be worked, shall change its status to Special Mining Efforts Area (Wilayah Usaha Pertambangan Khusus).
Overview of Mining Licenses in Indonesia
Based on the distribution of WP:
1. the WUP can be divided into one or several WUP licenses (Wilayah Izin Usaha Pertambangan or WIUP), which is granted to a holder of a Mining Efforts License (Izin Usaha Pertambangan or IUP [explained below]);
2. the activities in the Community Mining Area shall be determined by the regent/mayor through announcement of a Community Mining Area plan, and can be performed by a holder of a Community Mining License (Izin Pertambangan Rakyat or IPR [explained below]);
3. the Country Reserves Area can be divided into one or several Special Mining Efforts Area License(s) (Wilayah Izin Usaha Pertambangan Khusus or WIUPK), which is granted to the holder of a Special Mining Efforts License (Izin Usaha Pertambangan Khusus or IUPK [explained below]).
Mining operations are implemented through:
1. IUP, which can be granted to corporate entities, cooperatives and/or individuals. The IUP is divided into two stages:
a. IUP Exploration, which is a license which is granted for performing any activity related to exploration, studies and general investigation;
b. IUP Production Operations, which is a license which is granted after all activities related to IUP Exploration have been completed. This license covers all exploitation activities, including but not limited to production operation activities, processing and sales.
2. IPR, which is a license that is granted to the local community to perform mining activities with limited investment and size. It is granted to local citizens, individuals, groups or cooperatives.
3. IUPK, which is a license that is required for the implementation operations in a Special Mining Efforts Area. It can be granted to an in Indonesia incorporated company, where public companies are given priority. Just as the IUP, the Special Mining Efforts License is divided into two similar stages:
a. IUPK Exploration;
b. IUPK Production Operations