Shares of Indonesian mining company Merdeka Copper Gold rose about 15 percent on its trading debut on Friday (19/06). The company, a subsidiary of Saratoga Capital, was the sixth company to conduct an initial public offering (IPO) on the Indonesia Stock Exchange (IDX) in 2015. Head of Finance and Corporate Secretary Ellie Turjandi said that Merdeka’s shares had been oversubscribed nearly 40 times during the public offering (11-15 June 2015), reflecting investors’ confidence even though the company has not yet begun production.

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Indonesian miners may be allowed to resume bauxite exports after a government official signalled that the Indonesian government is looking at relaxing its (raw) mineral export ban. This ban, implemented in January 2014, was introduced in an effort to boost domestic processing capacity, generate more revenue (by adding value to its mineral products) and enhance employment opportunities in Southeast Asia’s largest economy. However, amid the lack of domestic smelting capacity, the export ban has led to a plunge of exports.

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Bad news for Indonesian coal miners as the government of Indonesia plans to raise coal royalties in March 2015 in a bid to increase revenue from the natural resources sector. Apart from raising royalties, the government will also implement measures to enhance monitoring in the coal mining sector (as illegal coal shipments and tax avoidance are a major problem). The plan to nearly double coal royalties are particularly expected to impact negatively on smaller miners and new firms that focus on the production of low-quality coal.

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The Indonesian Ministry of Energy and Mineral Resources signaled that the government may (again) decide to postpone full implementation of its ban on exports of raw mineral ores and concentrates as the country still lacks sufficient smelting capacity to produce value-added mining products. Through this export ban, stipulated by the 2009 Mining Law, the Indonesian government aims to enhance revenue generation in the country’s natural resources sector by forcing miners to produce and export value-added products instead of raw materials.

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Indonesia’s Ministry of Energy and Mineral Resources may revoke the Mining Business Permit (Izin Usaha Pertambangan, or IUP) of 4,643 local mining companies at the end of January 2015 as these companies still lack the clean and clear certificate (CnC) from regional authorities. This CnC certificate indicates that the mining company has no outstanding royalty and other tax debts, fulfilled its exploration and environmental commitments, has no property delineation issues and obtained the necessary forestry permits.

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On 14 December 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as the central bank’s interest rate policy, an update on palm oil, the middle income trap, November car sales, the performance of the rupiah exchange rate, legal matters regarding mining, and more.

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Due to a strike at Freeport Indonesia’s Grasberg mine in Papua, the company’s copper production has fallen by about a third thus leading to speculation that global copper prices may increase after having fallen almost ten percent in 2014. About one thousand workers of Freeport Indonesia have been on strike since the second week of October after a fatal accident at the end of last month. The workers request the sacking of around 50 managers at the subsidiary of US-based Freeport-McMoRan Copper & Gold.

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Coal exports from Indonesia are expected to decline in the remainder of 2014 as the Indonesian government implemented a new licensing system for domestic coal miners - the ‘Listed Exporter’ status (Indonesian: Eksportir Terdaftar, ET) - per 1 October 2014 in an effort to optimize monitoring of the coal mining industry (illegal coal shipments from Indonesia form a structural problem). This new legal framework has led to confusion among miners causing that not all miners have been able to obtain the necessary status to resume coal shipments.

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R. Sukhyar, Director General for Coal and Mineral Resources at the Indonesian Ministry of Energy and Mineral Resources, stated that the country is plagued by structural illegal coal shipments from coal-rich regions in Kalimantan and Sumatra. Sukhyar estimates that each year between 30 and 40 million tons of coal is exported illegally from Indonesia, Southeast Asia’s largest economy. Based on current coal prices, this would imply that USD $1.2 billion worth of coal is shipped illegally per year causing the government to miss out on royalties.

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Indonesia’s House of Representatives (DPR) has passed a new plantations bill that aims to maximize land usage and opens up Indonesia’s plantation sector to smallholders. However, the retroactive clause that would limit foreign ownership to a maximum of 30 percent (from 95 percent currently) was dropped from the final version. This clause was highly controversial and would have been a major obstacle for foreign companies engaged in Indonesia’s plantation sector (such as Golden Agri-Resources and Wilmar International).

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Over the past decade we have seen some examples of protectionist tendencies in the mining sector of Indonesia. For example, gold and copper miner Freeport Indonesia came under Indonesian control in late-2018 after the state acquired a 52.1 percent stake in the company as a consequence of renegotiations (which also involved the extension of the company’s mining permits in Indonesia).

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On 10 June 2023 the Indonesian government imposed a ban on bauxite ore exports in a bid to encourage the development of a domestic bauxite processing and refining industry. This move was not a surprise. Over the past couple of years, government officials had mentioned their desire to ban bauxite ore exports from June 2023. And in December 2022 it was Indonesian President Joko Widodo himself who reaffirmed this ambition.

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On 21 December 2022 Indonesian President Joko Widodo stated that the Indonesian government will ban exports of bauxite ore starting from June 2023 in an effort to encourage the development of a domestic bauxite processing and refining industry.

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“After the nickel ore ban [imposed in January 2020], we focus on bauxite this year [2022]. And after bauxite, we will go for tin and copper. We have to dare to take these steps!”

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In recent times, commodities have been ‘hot’. The rebound in economic activity after the COVID-19 pandemic (in combination with disrupted supply and logistics chains) started a high commodity price cycle. This cycle that was subsequently strengthened by the Russo-Ukrainian war.

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Whenever Indonesia Investments discusses or illustrates the risks that are involved in Indonesia’s investment environment, we usually take the 2009 Mining Law as an example to illustrate the lack of legal certainty in Indonesia. Lack of legal certainty is one the key obstacles in Indonesia’s investment environment, and has therefore been undermining investment realization in Indonesia.

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By revising Indonesian Government Regulation No. 23/2010, the Indonesian government plans to provide local coal miners more certainty by allowing an earlier submission of a request for the extension of mining concessions. Stakeholders in the mining sector argue that this would considerably strengthen the nation’s investment climate, specifically the coal mining industry, on the back of improved legal certainty.

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After years of struggle and negotiations there now seems light at the end of the tunnel for the Indonesian government and US mining giant Freeport-McMoRan Inc. Both sides signed a Head of Agreement on Thursday 12 July 2018 that will give Indonesia’s state-owned mining company Indonesia Asahan Aluminum (better known as Inalum) and the local government of Papua a 51.23 percent stake in Freeport Indonesia, implying the company - the operator of the Grasberg mine, which is the world’s largest gold mine and second-largest copper mine – will come under Indonesian control.

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One of the companies, listed on the Indonesia Stock Exchange, that is experiencing a very good performance so far in 2018 is vertically integrated and diversified mining and metals company Aneka Tambang, a state-controlled entity. Not only did the company's corporate earnings and production figures surged in the first quarter of 2018 on the back of stronger commodity prices (and rising demand), but shares of Aneka Tambang also soared - by a whopping 45.60 percent - up to Friday (22/06).

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Indonesian heavy equipment distributor Intraco Penta is optimistic that its corporate earnings will improve in 2018 and 2019 on the back of rising coal prices and the so-called "replacement cycle". Ferdinand Dion, Investor Relations Strategist at Intraco Penta, said every five years mining companies tend to replace those heavy equipment units that have been consistently used for the past five years.

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