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03 June 2020 (closed)
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Recently the Indonesian Government issued Government Regulation number 1 of 2017 (Regulation 2017). The Regulation 2017 is the fourth amendment of Government Regulation 23 of 2010 on the implementation of Mineral and Coal Mining Activities. In this column we discuss the main changes in the Regulation 2017 which relate to the extension of the business license of mining companies, the sales of minerals and coal, the divestment obligation and the refinery obligation.
Extension of Business License
The Regulation 2017 revises the period in which mining companies are allowed to apply for extension of their business license. The Regulation 2017 sets the following new application periods:
- The extension of a mining production operation business license (IUP OP):
- for metal minerals and certain non-metal minerals, companies are required to apply between five and one year before the expiration of the business license
- for non-metal minerals or rocks, companies are required to apply between two years and six months before the expiration of the business license
- The extension of a special mining production operation business license (IUPK OP) must be submitted between five and one years before the expiration of the business license.
Minerals and Coal Sales Requirements
The Regulation 2017 further clarifies the mandatory use of benchmark prices set by the Ministry of Energy and Mineral Resources. The regulation also explains that selling is limited to coal or minerals only and not to both mineral resources.
Regulation 2017 sets a new divestment scheme for PMA mining companies which hold a IUP or IUPK. All these companies are now required to gradually divest at least 51% of the total share capital after the fifth year of operation, based on the following scheme:
Refinery Obligation and the Export of Mineral Concentrates
Under Regulation 2017 it is no longer allowed to export refined metal mineral resources in case companies work under a Mining Work Contract (Kontrak Karya). In case these companies wish to export there minerals, they are required to comply with the requirements set in Ministry Regulation number 5 of 2017 on the Enhancement of the Added Value of Minerals Through Domestic Mineral Processing and Refinement Activities.
This column is provided by PNB Law Firm Jakarta