English | 中文 | 下载审德中文简介 

Aug

09

Permissible Quantities of Commodities in Business Mining Permits in Indonesia

Indonesia, a nation composed of multiple islands blessed with a diverse array of natural resources, includes valuable mineral resources among its treasures. Within this category, mining commodities encompass both coal and various minerals. As outlined by the Geological Agency of the Ministry of Energy and Mineral Resources of Indonesia (ESDM), the country's mineral resources are divided into two main groups: metallic minerals and non-metallic minerals.

With the abundance of these resources, Indonesia has attracted numerous investments in mining businesses within its territory. The considerable interest among business entities in this endeavor raises the question of whether a single company can hold multiple mining concessions.

Insights into Mining Activities as Per the Legislation in Indonesia

According to Article 1, Number 1 of Law No.3/2020 concerning Mineral and Coal (Mining Law), Mining refers to any or all stages of activities related to the management and exploitation of minerals or coal, including general exploration, exploration proper, feasibility studies, construction, mining operations, processing and/or refining, or development and/or utilization, transportation, sales, and post-mining activities.

In accordance with Article 1, Number 6 of the Mining Law, Mining Business denotes activities concerning the exploitation of minerals or coal, encompassing the stages of general exploration, exploration proper, feasibility studies, construction, mining operations, processing and/or refining, or development and/or utilization, transportation, sales, and post-mining activities.

Various Permits Required in Mining Business

Entrepreneurs engaging in mining activities in Indonesia are required to obtain an IUP (Mining Business License). This IUP is subject to certain limitations in its usage. The Mining Law addresses the question of whether a single company is permitted to hold more than one IUP.

IUP/IUPK Limitation

Article 40, paragraph 1 of the Mining Law stipulates that an IUP (Mining Business License) is granted for one type of mineral or coal. Paragraph 2 clarifies that the IUP holder may have more than one IUP or IUPK (Mining Business License for Special Purposes). However, paragraph 3 specifies that the provisions in paragraph 2 only apply to State-Owned Enterprises (BUMN) or IUP holders who already possess IUPs for metallic mineral and coal commodities and intend to acquire an IUP for non-metallic mineral and/or rocks.

Newly Discovered Commodities in the Mining Process

During mining operations, it is common to discover new commodities within the area covered by the IUP. If other commodities are found, the IUP holder has the priority to manage them by applying for a new IUP to the Minister.

Ministerial Regulation (PERMEN) ESDM 7/2020 further elaborates on this matter. In Article 11, paragraph 1, it is stipulated that if a metallic mineral WIUP (Mining Business License) or metallic mineral WIUPK (Mining Business License for Special Purposes) contains a non-associated group of metallic mineral mining commodities with prospects for exploitation, the Minister may establish a new WIUP or WIUPK.

Furthermore, in Article 11, paragraph 5, if the holder of an IUP or IUPK within the newly designated WIUP or WIUPK, as mentioned in paragraph 1, wishes to develop the new WIUP or WIUPK, the government mandates that the IUP holder must establish a new business entity. However, an exception is provided in paragraph 6 if the IUP holder is a publicly listed company (go public).

Conclusion

Consequently, it can be inferred that a non-State-Owned Enterprise (non-BUMN) is only allowed to possess one IUP for metallic mineral commodities. However, there is an exception for specific non-BUMN entities, such as private business entities, cooperatives, and individual enterprises, which are permitted to hold multiple IUPs for non-metallic mineral and/or rock commodities. Another exception arises when the IUP holder discovers new commodities within the managed WIUP, granting the company priority in exploiting them, subject to the specified requirements.

Should new commodities be found within the managed WIUP, the aforementioned private business entity may submit an IUP application to the Minister through a formal request, provided that the company is publicly listed (go public).

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled a plethora of similar matters, boasting a team of experienced and professional corporate and civil lawyers, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author: Budhi Satya Makmur