Implementation of mineral and coal mining business activities

The Government of the Republic of Indonesia has issued Government Regulation No. 96 of 2021 on the Implementation of Mineral and Coal Mining Business Activities dated September 9, 2021 (“GR 96/2021”). GR 96/2021 is issued as an implementation of the Job Creation Act No. 11 of 2020 of 5 October 2020 which amends the Coal and Minerals Act No. 4 of 2009 ( “Mining law”).

GR 96/2021 stipulates several provisions that are considered significant changes from the previous government regulation, namely Government Regulation No. 23 of 2010 regarding the implementation of commercial activities of mineral and coal extraction, as as last amended by Government Regulation No. 8 of 2018 on the Fifth Amendment to Government Regulation No. 23 of 2010 on the Implementation of Mining and Coal Business Activities (“GR 23/2010”).

This update will discuss several critical changes in GR 96/2021 in relation to the implementation of commercial mineral and coal mining activities, including (i) business licensing, (ii) the system of call for tenders; and (iii) the obligation to divest.

Commercial licenses

GR 96/2021 stipulates that mining commercial activities must be carried out on the basis of a commercial license which is under the authority of the central government through the OSS system (single submission online), which is carried out by granting the following elements:

  1. Company identification number (Nomor Induk Berusaha Where “FEATHER”);
  2. Certification standards; and or
  3. Licence.

The license as mentioned in point 3 above is a license which depends on the type of mining business activities which consists of:

  1. Mining license (Izin Usaha Pertambangan Where “IUP”);
  2. Special Mining License (Izin Usaha Pertambangan Khusus Where “IUPK”);
  3. IUPK as a continuation of the operating contract/agreement;
  4. Community Mining License (Izin Pertambangan Rakyat Where “DPI”);
  5. Letter of Authorization for Rock Mining (Surah Izin Penambagan Batuan Where “SIPB”);
  6. Assignment license (Izin Penugasan);
  7. Transport and sales license (Izin Pengangkutan and Penjualan);
  8. Commercial Mining Service License (Izin Usaha Jasa Pertambangan Where “IUJP”); and
  9. IUP for sales (IUP in Penjualan).

As an indication, the IUPs which consist of the Exploration IUP and the Exploitation Exploitation IUP (“IUP-OP”) are granted by the Minister of Energy and Mineral Resources (“MEMR”) based on the request submitted by:

  1. Business entity, consisting of Badan Usaha Milik Negara (BUMN) or state-owned enterprises, Badan Usaha Milik Daerah (BUMD) or regional enterprises or private companies;
  2. Cooperative (both IUP Exploration and IUP-OP); Where
  3. Sole Proprietorship (both IUP Exploration and IUP-OP).

IUP cannot be granted to persons with Indonesian citizenship (WNI), but for IUPs that were previously intended for WNI, they are still valid until the expiration of this license.

Mining Services Company (Usaha Jasa Pertambangan)

IUP or IUPK holders are required to use local and/or national mining service companies, which provide mining services in consulting, planning and implementation of activities in the following areas:

  1. general survey;
  2. Exploration;
  3. Feasibility study;
  4. mining construction;
  5. Transport;
  6. Mining environment;
  7. Reclamation and post-mining;
  8. Mining safety; and or
  9. Mining.

Subsequently, IUP and IUPK holders can use mining service companies which are Indonesian legal entities in the framework of foreign investment (PMA) if no local and/or national mining service company is technically and/or financially capable of carrying out these activities. The use of PMA mining service companies can be made after the IUP and IUPK holders have made announcements in the local and/or national media.

Mining Licenses for Public Enterprises (BUMN)

GR 96/2021 also regulates IUPs for BUMN. This regulation stipulates that certain areas of the mining license area (“WIUP”) which are used for the Production Operation (“PO”) by BUMN may be transferred to another business entity, of which 51% (fifty-one percent) or more of its shareholding is held by BUMN holding IUP whose WIUP will be transferred. In addition, ownership of BUMN shares in other business entities cannot be diluted to less than 51% (fifty-one percent).

However, this transfer can be made after obtaining approval from the MEMR. In addition, the implementation requirements will be explained in more detail in a MEMR regulation.

Licensing areas for metallic minerals through auctions

Mining Permit Areas (WIUP) include:

  1. radioactive mineral WIUP;
  2. Metal Mineral WIUP;
  3. WIUP Coal;
  4. non-metallic mineral WIUP;
  5. WIUP of certain types of non-metallic minerals; and
  6. Rock WIUP.

Metal Mineral and Coal WIUP may be achieved through auctions, in which MEMR publicly announces the auction plan no later than 14 (fourteen) calendar days or no later than 60 (sixty) calendar days prior to the ‘bid.

The announcement of the proposed auction of WIUP of metallic minerals or WIUP of coal can be made openly with the following provisions:

  1. Published in 1 (one) local written media and/or 1 (one) national written media;
  2. Announced at the office or on the official website of the ministry that manages government affairs in the field of minerals and coal; and or
  3. Announced at the office or on the official website of the provincial government.

Provisions relating to the sale of shares

Business entities holding IUP and IUPK at production operation stage for PMA are required to hand over shares of at least 51% (fifty-one percent) in stages to central government, regional government, BUMN , BUMD and/or national private commercial entities. .

On the previous provisions, which were Government Regulation No. 1 of 2017 on the Fourth Amendment of GR 23/2010 (“GR 1/2017“), requires that all LDCs as IUP and IUPK holders who, after 5 (five) years of operation, are required to surrender their shares in stages so that in the tenth year, at least 51% (fifty-one for cent) are owned by locals.

The obligation to surrender shares for holders of IUPs and IUPKs at the exploitation stage of production is governed by the following provisions: