The New Regulation on mining revokes several regulations and regulates at least four areas. First, entities engaging in (i) the transportation and sale of mineral or coal and (ii) mining supporting activities outside the scope of IUJP, now need to apply for a “registration certificate”. Secondly, Surety Deposit payments have been defined. Thirdly, public companies with multiple IUPs may benefit from a centralisation of issuing authority at MEMR. Finally, MEMR approval for a change of investment and financing sources for COW and CCOW holders might no longer be required.

Background

On 9 May 2017, the Government of the Republic of Indonesia introduced a new implementing regulation of Law No. 4 of 2009 on Mineral and Coal Mining (Mining Law), namely, the Minister of Energy and Mineral Resources (MEMR) Regulation No. 34 of 2017 on Licences in the Sector of Mineral and Coal Mining (New Regulation). The New Regulation stipulates types of licences in the mining sector as well as the respective application requirements and procedures, and mining holders’ rights, obligations, and prohibitions. It aims to simplify the regulations on mining (and mining service) licences, which were previously governed by various MEMR regulations.

Revocation of regulations

As part of the simplification process, the New Regulation revokes the following regulations: (i) MEMR Regulation No. 18 of 2009 on Procedures to Amend Investment in the Framework of Contracts of Work and Coal Contracts of Work (MEMR Regulation 18/2009); (ii) MEMR Regulation No. 28 of 2009 on the Administration of the Coal and Mining Services Business, as amended; (iii) MEMR Regulation No. 27 of 2013 on Procedures and Determination of Share Divestment Prices, and Changes to Investment in the Mineral and Coal Mining Business; (iv) MEMR Regulation No. 32 of 2013 on Procedures for the Granting of a Special Licence in the Mineral and Coal Mining Sector, as amended by MEMR Regulation No. 32 of 2015 (MEMR Regulation 32/2013); and (iv) Minister of Mining and Energy Decree No. 555.K/26/M.PE/1995 on General Mining Work Safety and Health on matters relating to the issuance of licences.

A new registration certificate

Replacing Special ‘IUP-OP on Transportation and Sale’ licences

Under the New Regulation, the Special IUP-OP on Transportation and Sale licences (previously regulated under MEMR Regulation 32/2013) have been replaced by a new company registration certificate for the transportation and sale of mineral or coal mining commodities (tanda registrasi perusahaan pengangkutan dan penjualan mineral dan batubara). Special IUP OP on Transportation and Sale licences (issued prior to the enactment of the New Regulation) will remain valid until their expiration date.

New registration certificate for other supporting activities for mining companies

The New Regulation provides that Mining Business Licence (IUP) and Special Mining Business Licence (IUPK) holders can only cooperate with business entities conducting other supporting activities for mining companies (outside those granted under a mining service business licence or IUJP) that have obtained a registration certificate (tanda registrasi). For such entities, the new registration certificate replaces the requirement to obtain the registration reference letter (surat keterangan terdaftar). The scope for the new registration certificate seems to include any supporting activities for mining companies, including food services, accommodation services, etc.

Surety deposits defined

The New Regulation finally regulates Surety Deposit as mandated under Government Regulation No. 1 of 2017 on the Implementation of Mineral and Coal Mining Business Activities. The Surety Deposit must be made in the form of a time deposit with a government or regional government bank in the following amount:

(a) IDR5,000,000 if the Exploration IUP area or the Exploration IUPK area is less than or equal to 40 hectares; or

(b) IDR150,000 per hectare if the total area is more than 40 hectares.

Treatment for public mining companies holding multiple IUPs

The New Regulation introduces a treatment for public mining companies, stipulating that an IUP will be issued by the MEMR (as opposed by the regional government) if the following are applicable: (1) the applicant is a public company; (2) the applicant owns more than one IUP for metal mineral or coal; and (3) the IUP area is located in more than one province.

This suggests that in cases where a public mining company owns at least two IUPs in different areas, the issuing authority for such company is the MEMR instead of each Governor in which each IUP area is located, as in the case of a regular mining company.

Contract of Work (COW) and Coal Contract of Work (CCOW) holders

The New Regulation now only requires approval for (i) a work plan and budget (RKAB) and (ii) changes in directors, commissioners and shareholding composition. Arguably, under the New Regulation, a COW/CCOW company might no longer need to obtain MEMR approval to change their investment and financing sources outside an agreed RKAB which was regulated under the old MEMR Regulation 18/2009. Pending a further statement or implementing regulation by MEMR, it remains to be seen whether MEMR will require prior approval for a COW/CCOW company to change its investment and financing sources outside an agreed RKAB.