Introduction

On February 5 2016 the minister of energy and mineral resources issued the Regulation on the Procedure for the Issuance of Recommendation for Export Sales of Processed and Purified Minerals (05/2016).

The regulation revokes the previous minister of energy and natural resources and director general of minerals and coal regulations on the same matter (11/2014 and 861K/30/DJB/2014, respectively). It follows on from the new minister of trade regulation on the export of processed and purified minerals.

While the regulation still requires exporters to obtain a recommendation from the director general of minerals and coal, it has – among other things – simplified the mineral export procedure by revoking the requirement for mineral producers to be certified as registered mining product exporters.

The key areas covered by the regulation are:

  • mineral export sales;
  • the recommendation procedure;
  • domestic refining facility construction plans; and
  • the issuance of performance bonds to guarantee the construction of a refining facility.

Mineral export sales

The Ministry of Trade's recommendation is required only for the export of metal minerals that have passed the minimum processing standard, but have not passed the minimum refining standard. It is also required for metal mineral mining contract holders that have conducted part of the refining process. The recommendation is a prerequisite to export approval.

Recommendation procedure

To obtain a recommendation, the application form attached to the regulation must be submitted to the minister of energy and mineral resources in care of the director general of minerals and coal, along with a number of documents, including:

  • the domestic refining facility construction plan approved by the director general of minerals and coal on behalf of the minister of energy and mineral resources; and
  • proof of placement of the performance bond.

Under the regulation, the director general should issue its decision no more than 20 calendar days from the date on which the application is declared completely and correctly submitted. The recommendation is valid for six months and is extendable for another six months on expiry, on condition that construction of the refining facility has been realised to a certain extent. The extension application must be submitted between 45 and 30 days before the recommendation expires.

Domestic refining facility construction plan

The domestic refining facility construction plan must include a schedule for the facility's construction, the technology to be used in the construction, the investment value and the facility's annual capacity. The director general of minerals and coal's approval will be issued no more than 25 days after the date on which the application documents are accepted.

Performance bond

The performance bond requirement applies to mineral producers that:

  • have a mining production operation special delivery (IUP OP) licence or metal mineral contract and intend to construct refining facilities themselves;
  • have an IUP OP licence or metal mineral contract and intend to construct the refining facility in cooperation with metal mineral IUP OP licence holders, metal mineral contract holders, processing or refining principal licence holders or holders of IUP OP licences issued specifically for processing or refining; or
  • have an IUP OP licence specifically for processing or refining, intend to construct the refining facility themselves and process ore into metal mineral concentrates.

The performance bond must be approved by the minister of energy and mineral resources. Approval is sought via the prescribed application form attached to the regulation, which must be submitted to the minister in care of the director general of minerals and coal. The regulation provides guidance for the calculation of the performance bond, which must be placed (in rupiah) in an escrow account in a state-owned bank. The performance bond does not affect the mineral producers' obligation to increase the added value of their mining products domestically.

Liquidation of the performance bond may be applied for within the first six months when the refining facility is 60% complete. Mineral producers that fail to complete the facility within the first six months will be given two grace periods of six months each. If the refining facility is still incomplete after the two grace periods, the performance bond will be liquidated by the director general of minerals and coal and transferred to the state account.

For further information on this topic please contact Mahatma Hadhi at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125) or email (mhadhi@abnrlaw.com). The Ali Budiardjo, Nugroho, Reksodiputro website can be accessed at www.abnrlaw.com.

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