This content is from: Local Insights

Indonesia: Draft mining bill

A draft bill on minerals and coal mining is currently being circulated for discussion in the House of Representative of Indonesia

Oene MarseilleEmir Nurmansyah

A draft bill on minerals and coal mining is currently being circulated for discussion in the House of Representative of Indonesia. If passed, the bill is intended to replace the current Law No 4 of 2009 on minerals and coal mining.

The draft bill provides for different types of mining business licence (Izin Usaha Pertambangan, or IUP). This includes the exploration IUP (which is required for preliminary studies, feasibility studies, and exploration activities) and the operation-production IUP (which is required for construction, extraction, processing, and purification activities).

The exploration IUP and operation-production IUP are further delineated by the type of minerals being extracted. There are separate IUPs for: metals; non-metals; rare earth minerals; rock minerals; and, coal.

The period for which the licences are valid varies depending on the type of minerals and whether the licence is for exploration or operation-production. The period ranges from three years to 20 years but extensions are possible.

The draft bill also introduces a new license called the SIP. This is required for companies conducting exploration activities for certain minerals. However, the draft bill has not yet specified the type of minerals that will require the SIP licence. The relevant ministry is empowered to issue regulations on this.

The SIP licence is valid for six months.

The draft bill also contains a mandatory divestment provision whereby foreign shareholders of a mining company must transfer their shares to Indonesian nationals within five years of the company entering the production stage. Divestment through public share offering is permitted, provided the company has previously offered the shares to, and this offer was subsequently refused by, the central or regional government, the state or regionally-owned enterprises, and private Indonesian business entities.

The parliament is discussing the draft bill and the final bill may, therefore, differ substantially from the current draft.

Oene Marseille and Emir Nurmansyah

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Instant access to all of our content. Membership Options | 30 Day Trial