Coal and Mineral Mining Enterprise Activities Regulation

• Author: William A. Sullivan/Christian Teo Purwono & Partners
• Profession: Licensed Foreign Advocate in Indonesia as well as a Solicitor of the Supreme Court of New South Wales
• Pages: 83-106

CHAPTER 8

Coal and Mineral Mining

Enterprise Activities Regulation

I. Executive Summary

1. Overview

1.1 The Mining Mineral Enterprise Activities Regulation (hereinafter referred

to as “GR 23/2010”) was issuedwith legal effect from February 1, 2010,

and by way of the implementation of Articles 5(5), 34(3), 49, 63, 65(2),

71(2), 76(3), 84, 86(2),103(3), 109, 111(2), 112, 116, and 156 ofthe 2009

Mining Law.

1.2 GR 23/2010 have now been amended by GR 24/2012. See Chapter 16

for further details of GR 24/2012.

2. Approach

2.1 WIUPs/WIUPKs: A BusinessEntity, cooperative, or individual, having

the intention to carry out mineral or coal mining, may only hold one

WIUP/WIUPK, while a publicly listed company may hold more than one

WIUP/WIUPK.

2.2 IUPs/IUPKs: The holder of an Exploration IUP/IUPK is guaranteed

the right to obtain a Production Operation IUP/IUPK without

going through a tender process. However, an Exploration IUP/IUPK

holder is still obliged to submit an application to the Relevant Gov-

ernment Authority and fulfill various requirements in connection with

upgrading the Exploration IUP/IUPK to become a Production Oper-

ation IUP/IUPK.

2.3 An Exploration IUP/IUPK holder has a first-priority right to exploit

minerals, other than the type of mineral specified in its IUP/IUPK,

83

found on its WIUP/WIUPK and may submit a new application to the

Relevant Government Authority for a separate Exploration IUP in

respect of the same.

2.4 The IUP/IUPK holder must submit to the Relevant Government

Authority (i) all exploration and/or production operation data and

(ii) periodic reports covering, among other things, the Work Plan

and Expenditure Budget for mining activities undertaken within the

specified period.

2.5 A Special Production Operation IUP for the processing and refining

of mineral products only may be granted by MoEMR.

2.6 Domestic Obligation: For the purpose of meeting domestic needs

for minerals and coal only, the Government has the right to deter-

mine the domestic selling price of the minerals and coal as well as to

control other aspects of the production, supply, and sale of minerals

and coal.

2.7 Benchmark Pricing: The holder of a Production Operation IUP,

exporting the minerals or coal it produces, is obliged to sell at not

less than the “benchmark price”as determined by (i) MoEMR for

metal minerals and coal and (ii) the relevant Governor/Regent

for nonmetal minerals and rocks.

2.8 Divestiture: Not later than 90 days after the fifth anniversary of

production, a foreign-owned IUP/IUPK holder must divest shares

(“Divestiture Shares”) to local parties, such that local parties

hold a minimum of 20% of the issued capital of the IUP/IUPK

holder.

1

2.9 The Divestiture Shares must be offered to the Government (BUMN

or BUMD) in the first instance. The Government must accept the

offer within sixty days or, otherwise, the Divestiture Shares are then

to be offered to national private business entities, which must accept

the offer within thirty days.

2.10 A local Indonesian party, which wishes to acquire the Divestiture

Shares, must pay the purchase price for the Divestiture Shares not

later than ninety days after the local Indonesian party expresses its

intention to acquire the Divestiture Shares.

2.11 Any subsequent increase in the capitalization of the IUP/IUPK

Holder must not result in the dilution of the ownership of the

local Indonesian party that has acquired the Divestiture Shares.

The local Indonesian party shall maintain its 20% share ownership.

1

The divestiture requirement has now been increased to 51% after ten years. See

Chapter 16 for details of the increased divestiture requirement.

84 Mining Law & Regulatory Practice in Indonesia