Licensing Framework for Mineral and Coal Mining

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Generally
Mining is defined as a part or all of the stages of activities in the framework, management and exploitation of minerals or coal that include general investigations, exploration, feasibility studies, construction, mining, processing, refining, development, utilization, transportation and sales, as well as post-mining activities. (Article 1(1) of Law No. 3 of 2020 concerning Amendment to Law No. 4 of 2009 concerning Mineral and Coal Mining (“Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining“).

The Mining Business is defined as activities in the framework of mineral and coal exploitation that include the stages of activities of general investigations, exploration, feasibility studies, construction, mining, processing, refining, development, utilization, transportation and sales, as well as post-mining activities. (Article 1(6) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

All Mining Business activities require licenses. The kind of license required is dependent on the intended Mining activities and whether Coal or Minerals will be mined. Different kinds of Minerals also require different kinds of licenses. But, all Mining Business licenses fall under the main category of Mining Business Licenses (Izin Usaha Pertambangan), commonly referred to as IUP. (Article 1(7) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Some definitions will be helpful.

Mining Business License (Izin Usaha Pertambangan – IUP) is a license to conduct Mining Business activities. (Article 1(7) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Special Mining Business Licenses (Izin Usaha Pertambangan Khusus – IUPK) is a license to conduct Mining Business activities in special Mining Business permit areas. (Article 1(11) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Rock Mining License Document (Surat Izin Penambangan Batuan – SIPB) is a license to conduct certain kinds of rock Mining Business activities or for certain requirements. (Article 1(13a) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Special Mining Business Licenses for Continuation of Operations Contract/Agreement (IUPK sebagai Kelanjutan Operasi Kontrak/Perjanjian) is a licenses that is granted as an extension after the completion of the implementation of a Contract of Work or a Coal Mining Business Work Agreement. (Article 1(13b) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Transport and Sales License (Izin Pengangkutan dan Penjualan) is a license that is granted to companies to purchase, transport and sell mineral and coal Mining commodities. (Article 1(13c) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Mining Services Business License (Izin Usaha Jasa Pertambangan – IUJP) is a license that is granted to conduct core mining services business activities that are related to all of the stages and/or parts of Mining Business. (Article 1(13d) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Government Control
Control over Mineral and Coal resources is managed by the Central Government. (Article 4(1) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). The Central Government is controlled by the President who is assisted by the Vice President and the Ministers. (Article 1(36) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). The Central Government is the heart of Mining licensing. Its power is broad.

In the licensing domain, the powers of the Central Government touching on Mining Business licenses of course include granting licenses. However, a lot goes into determining which licenses to grant. To make these determinations, the Central Government stipulates a broad foundation of related matters including national Mineral and Coal management plans, policies, standards, guidelines and criteria; supervision, production, marketing, exploitation and conservation, geological and Mining data management, the national Mineral and Coal resources balance sheet, benchmark pricing for metals, certain non-metal Minerals, radioactive Minerals and Coal, and, among other things, the all-important investment value limitations and total share percentage ownership limits and divestment requirements for foreign capital. (Article 6 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

All of the foregoing elements go into the stipulation of the national Mineral and Coal Management Plan prepared by the Minister every 5 (five) years. (Article 8A of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). This plan takes into account natural resource and environmental matters, spatial management, zoning, scientific and technological developments, economic conditions, the size of available Mining Territories and infrastructure; and must also take into consideration the national and regional development plans. (Article 8A(2) and (3) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Mining Territories
The entire territory of Indonesia isn’t open to mining at any given time. Rather, the Central Government determines available Mining Territories in coordination with Regional Governments in consultation with the House of Representatives (Dewan Perwakilan Rakyat – DPR). (Articles 6(f) and 9 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

A few additional definitions concerning Mining Territories will be useful at this point.
Mining Territories (Wilayah Pertambangan – WP) are defined as territories that possess Mineral and/or Coal potential. These Mining Territories transcend the governmental administrative borders that constitute the national spatial layout. (Article 1(29) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).
Mining Territories consist of the following subgroups (Article 10 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining):

Mining Business Territories (Wilayah Usaha Pertambangan – WUP) are parts of the Mining Territories that already possess available data, information concerning Mining potential and/or geological information. (Article 1(30) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). Each WUP consists of one or several Mining Business License Territories that may lie across provinces, districts and cities and/or within a single province, district or city. (Article 16 of Law No. 4/2009 on Mineral and Coal Mining).

Mining Business License Territories (Wilayah Izin Usaha Pertambangan – WIUP) are territories that are granted to holders of Mining Business Licenses (IUP) or holders of Rock Mining License Documents (Surat Izin Penambangan Batuan – SIPB). (Article I, Point 1, Article 1(31) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).
Community Mining Territories (Wilayah Pertambangan Rakyat – WPR) are parts of the Mining Territories designated as places to conduct community Mining Business activities. (Article I, Point 1, Article 1(32) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

State Reserve Territories (Wilayah Pencadangan Negara – WPN) are parts of the Mining Territories that are reserved for strategic national interests. (Article I, Point 1, Article 1(33) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Special Mining Business Territories (Wilayah Usaha Pertambangan Khusus – WUPK) are territories that already possess available data, information concerning Mining potential and/or geological information that can be utilized for strategic national interests. (Article I, Point 1, Article 1(34) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

The Central Government, through the Minister, is required to designate Mining Territories in a transparent, participative, responsible and integrated manner taking into consideration relevant governmental agencies, impacted communities, ecology, the environment, economics, human rights and social culture. (Article I, Points 10 and 11, Articles 10 and 11 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Size of a Mining Business License Territory – WIUP
The size of a Mining Business License Territory (WIUP) for metal Minerals and Coal is stipulated by the Minister after being determined by the governor of the relevant territory; while territories at sea are stipulated through coordination between the Minister and other relevant government agencies. (Article 17(1) and (2) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). Considerations include available reserves, national production capacity and domestic demand. (Article 17(3) and (4) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Business Licenses for Commercial Mining Businesses
For businesses desiring to engage in commercial Mining Business activities, one of the licenses from among the following categories of Mining Business Licenses (Izin Usaha Pertambangan-IUP) must be obtained. Those categories, as mentioned above, include the following potential licenses:

  • Special Mining Business License (Izin Usaha Pertambangan Khusus – IUPK)
  • Rock Mining License Document (Surat Izin Penambangan Batuan – SIPB)
  • Special Mining Business License for Continuation of Operations Contract/Agreement (IUPK sebagai Kelanjutan Operasi Kontrak/Perjanjian)
  • Transport and Sales License (Izin Pengangkutan dan Penjualan)
  • Mining Services Business License (Izin Usaha Jasa Pertambangan – IUJP)

Categories of Mining Businesses
Next we come to the categorization of the different kinds of Mining. Broadly speaking, Mining Business is divided between Mineral Mining and Coal Mining. (Article 34 of Law No. 4/2009 on Mineral and Coal Mining). Mineral Mining is further divided into radioactive Mineral Mining, metal Mineral Mining, non-metal Mineral Mining and rock Mining. (Article 34(1) and (2) of Law No. 4/2009 on Mineral and Coal Mining).

All of the aforementioned Mining Business activities are implemented on the basis of Business Licenses issued by the Central Government. (Article 35(1) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).
Business Licenses are granted through the grant of primary business numbers (nomor induk berusaha – NIB), standard certificates and/or licenses consisting of Mining Business Licenses (Izin Usaha Pertambangan – IUP), Special Mining Business License (Izin Usaha Pertambangan Khusus – IUPK), Special Mining Business License for Continuation of Operations Contract/Agreement (IUPK sebagai Kelanjutan Operasi Kontrak/Perjanjian), Rock Mining License Document (Surat Izin Penambangan Batuan – SIPB), Transport and Sales License (Izin Pengangkutan dan Penjualan), Mining Services Business License (Izin Usaha Jasa Pertambangan – IUJP) and Mining Business Licenses for Sales (Izin Usaha Pertambangan untuk Penjualan). (Article 35 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). And, the Central Government has the authority to delegate the issuance of Business Licenses to provincial Regional Governments. (Article 35(4) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Mining Business Licenses – IUP
Mining Business Licenses (Izin Usaha Pertambangan – IUP) themselves are further subcategorized into IUP Exploration and IUP Operation Production. (Article 36(1) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUP Exloration (IUP Eksplorasi) cover activities of general investigation, exploration and feasibility studies.

IUP Operation Production (IUP Operasi Produksi) include activities of construction, Mining, processing, refining, development, utilization, transportation and sales. (Article 36(1) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Holders of IUP are entitled to engage in a part or all Mining Business activities in accordance with the provisions of regulations of law in effect. (Article 36(2) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). However, holders of IUP are required to utilize contractors holding Mining Services Business Licenses (Izin Usaha Jasa Pertambangan – IUJP) for most core Mining Business activities. Please see our article entitled “Mining Services Business” for further details on these requirements.

Those with capacity to obtain IUP include business entities, cooperatives and sole proprietorships or partnerships. (Article 38 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

The contents of an IUP is quite detailed. Here is a list of the mandatory elements of every IUP:

  • the company profile of the IUP holder
  • the location and size of the territory
  • the kinds of commodities to be mined
  • the obligation to submit a guarantee to conduct serious exploration efforts
  • working capital requirements
  • the term of validity of the IUP
  • the rights and obligations of the IUP holder
  • provisions concerning the extension of the term of the IUP
  • the obligation to settle land rights
  • the obligation to pay state and regional revenue including fixed royalties and production royalties
  • reclamation and post Mining obligations
  • the obligation to compile environmental documentation; and
  • the obligation to engage in development of the community in the vicinity of the WIUP

(Article 39 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

While an IUP can only be granted for 1 (one) kind of Mineral, or for Coal, IUP holders are permitted to hold multiple IUP if the holder is either a State-owned enterprise or the holder of an IUP is licensed to Mine non-metal Minerals or rocks, or if an IUP holder finds other minable commodities in their WIUP. (Article 40 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). However, if an IUP holder finds other minable commodities in their WIUP and does not want to mine them, the Minister is permitted to grant an IUP to another party. (Article 40(7) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUP Exploration terms are as follows:

  • 8 (eight) years for metal Minerals
  • 3 (three) years for non-metal Minerals
  • 7 (seven) years for certain specified non-metal Minerals
  • 3 (three) years for rock
  • 7 (seven) years for Coal

(Article 42 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUP Exploration can be extended for additional 1 (one) year terms every time an extension is applied for provided all conditions have been met. (Article 42A of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).
The law also provides that the holder of an IUP Exploration is guaranteed the right to continue its Mining activities into the phase of operations and production provided the IUP Exploration holder is able to fulfill all administration, technical, environmental and financial conditions. (Article 46 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUP Operation Production terms are as follows:

  • 20 (twenty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for metal Minerals
  • 10 (ten) years with 2 (two) guaranteed term extensions of 5 (five) years each for non-metal Minerals
  • 20 (twenty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for certain specified non-metal Minerals
  • 10 (ten) years with 2 (two) guaranteed term extensions of 5 (five) years each for rock
  • 20 (twenty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for Coal
  • 30 (thirty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for metal Minerals integrated with processing and/or refining facilities
  • 30 (thirty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for Coal integrated with development and/or exploitation activities.

(Article 47 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

WIUP for metal Minerals and Coal are are granted through the auction process. (Articles 51 and 60 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

WIUP for non-metal Minerals and rock is granted through application to the Minister. (Articles 54 and 57 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Mineral and Coal IUP Operation Production holders are permitted to apply to the Minister for expansion of the boundaries of their WIUP for purposes of optimalization and efficiency in the exploitation of reserves. (Article 62A of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Special Mining Business Licenses – IUPK
IUPK are granted by the Minister for 1 (one) kind of metal Mineral or Coal in 1 (one) WIUPK. (Article 74 of Law 4/2009 on Mineral and Coal Mining). IUPK holders are granted priority rights to mine other Minerals they discover in their WIUPK. (Article 74 of Law 4/2009 on Mineral and Coal Mining). However, if an IUPK holder finds other minable commodities in their WIUPK and does not want to mine them, the Minister is permitted to grant an IUP to another party. (Article 74 of Law 4/2009 on Mineral and Coal Mining).

Those with capacity to obtain IUPK include business entities who are legal entities, including State-owned enterprises, region-owned enterprises, and private business entities. (Article 75(1) of Law 4/2009 on Mineral and Coal Mining). However, State-owned enterprises and region-owned enterprises are given priority. (Article 75(3) of Law 4/2009 on Mineral and Coal Mining).

While IUPK can be granted to private businesses, State-owned and region-owned entities are granted priority. (Article 75 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUPK are granted to private businesses through auctions of WIUPK. (Article 75(4) of Law 4/2009 on Mineral and Coal Mining).

Holders of IUPK are required to utilize contractors holding Mining Services Business Licenses (Izin Usaha Jasa Pertambangan – IUJP) for most core Mining Business activities. Please see our article entitled “Mining Services Business” for further details on these requirements.

It should be noted that holders of IUPK can be granted licenses to conduct Mining Business activities in Special Mining Business Territories (Wilayah Usaha Pertambangan Khusus – WIUPK). (Article 29 of Law No. 4/2009 on Mineral and Coal Mining).

IUPK are further subcategorized into IUPK Exploration and IUPK Operation Production. (Article 76 of Law 4/2009 on Mineral and Coal Mining).

IUPK Exploration (IUPK Eksplorasi) cover activities of general investigation, exploration and feasibility studies. (Article 74(1) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUPK Operation Production (IUPK Operasi Produksi) include activities of construction, Mining, processing, refining, development, utilization, transportation and sales. (Article 74(1) of Law 4/2009 on Mineral and Coal Mining).

Holders of IUPK are entitled to engage in a part or all Mining Business activities. (Article 74(2) of Law 4/2009 on Mineral and Coal Mining).

The law also provides that the holder of an IUPK Exploration is guaranteed the right to continue its Mining activities into the phase of operations and production provided the IUPK Exploration holder already possesses data resulting from a feasibility study. (Article 77 of Law 4/2009 on Mineral and Coal Mining).

The contents of an IUPK Exploration is quite detailed. Here is a list of the mandatory elements of every IUPK:

  • the name of the IUP holder
  • the location and size of the territory
  • a general spatial plan
  • a guarantee of seriousness/commitment
  • capital investment
  • provisions concerning the extension of the term of the IUP
  • the kinds of activities permitted
  • the plan for development of the community in the vicinity of the WIUPK
  • tax obligations
  • the obligation to settle land rights
  • the obligation to pay fixed contributions and exploration contributions
  • Environmental Impact Management Analysis (Analisis Manajemen Dampak Lingkungan – AMDAL)

(Article 78 of Law 4/2009 on Mineral and Coal Mining).

The contents of an IUPK Operation Production is also quite detailed. Here is a list of the mandatory elements of every IUPK:

  • the name of the IUP holder
  • the size of the territory
  • the mine location
  • the location of processing and refining facilities
  • transportation and sales provisions
  • investment capital
  • the term of the stage of activities
  • the obligation to settle land rights
  • environmental matters including reclamation and post Mining requirements
  • financial guarantee requirements for reclamation and post Mining requirements
  • the term of the IUPK
  • extensions of the IUPK term
  • other rights and responsibilities
  • matters relating to development of the community in the vicinity of the WIUPK
  • tax obligations
  • the obligation to pay royalties contributions and production royalties as well as state/regional revenues that consist of a profit share from the net benefits of production
  • provisions concerning the resolution of disputes
  • work health and safety
  • conservation of Minerals and Coal
  • obligations to utilize domestic goods, services, technology as well as engineering capabilities and building designs
  • the obligation to apply good economic and engineering Mining principles
  • the obligation to develop Indonesian human resources
  • Mineral and Coal data management
  • the application of principles of good economic and technical Mining principles
  • the obligation to divest shares

(Article 79 of Law 4/2009 on Mineral and Coal Mining).

IUPK Exploration terms are as follows:

  • 8 (eight) years for metal Minerals
  • 7 (seven) years for Coal

(Article 83 of Law 4/2009 on Mineral and Coal Mining).

IUPK Exploration can be extended for 1 (one) year every time an extension is applied for provided all conditions have been met. (Article 83A of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).
IUPK Operation Production terms are as follows:

  • 20 (twenty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for metal Minerals
  • 20 (twenty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for Coal
  • 30 (thirty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for metal Minerals integrated with processing and/or refining facilities
  • 30 (thirty) years with 2 (two) guaranteed term extensions of 10 (ten) years each for Coal integrated with development and/or exploitation activities.

(Article 83 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Mineral and Coal IUPK Operation Production holders are permitted to apply to the Minister for expansion of the boundaries of their WIUPK for purposes of optimalization and efficiency in the exploitation of reserves. (Article 83B of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUPK are granted by the Minister for 1 (one) kind of metal Mineral or Coal in 1 (one) WIUPK. (Article 74 of Law 4/2009 on Mineral and Coal Mining). IUPK holders are granted priority rights to mine other Minerals they discover in their WIUPK. (Article 74 of Law 4/2009 on Mineral and Coal Mining). However, if an IUPK holder finds other minable commodities in their WIUPK and does not want to mine them, the Minister is permitted to grant an IUP to another party. (Article 74 of Law 4/2009 on Mineral and Coal Mining).

While IUPK can be granted to private businesses, State-owned and region-owned entities are granted priority. (Article 75 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

IUPK are granted to private businesses through auctions of WIUPK. (Article 75(4) of Law 4/2009 on Mineral and Coal Mining).

Rock Mining License Document – SIPB
SIPB are granted for certain kinds of rock mining business activities for certain requirements. (Article 86(A)1 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

SIPB can be granted to State-owned enterprises, region-owned enterprises, private domestic capital investment companies, cooperatives and sole proprietorships and partnerships based on applications that fulfill administrative, technical, environmental and financial requirements. (Article 86A(2) and (4) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

The holder of an SIPB is permitted to engage in planning, Mining, processing, transportation and sales activities as soon as the holder is in possession of Mining plan documents. (Article 86A(6) and (7) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). Mining plan documents include technical documents that at least include information concerning reserves and a mine plan. (Article 86A(8) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

The contents of a SIPB include:

  • the name of the SIPB holder
  • the holder’s primary tax obligor number (nomor pokok wajib pajak – NIB)
  • the location and size of the territory
  • working capital
  • the kind of commodity to be mined
  • the rights and responsibilities of the SIPB holder

(Article 86B of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Mining Business Licenses for Sales
Business entities who are not engaged in the Mining Business but who sell mined Minerals and/or Coal are required to have IUP untuk Penjualan. (Article 105 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining). These permits are granted for 1 (one) individual sale only. (Article 105(2) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Transfers of Licenses and Shares
IUP and IUPK are not transferrable without the approval of the Minister; and then only after exploration activities are completed. (Article 93 of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).
IUP and IUPK holders are also not permitted to transfer their shares in the holding company without the approval of the Minister; and then only after exploration activities are completed. (Article 93A of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Securitization of IUP, IUPK and Mined Commodities
The law prohibits the securitization of IUP, IUPK and mined commodities to other parties. (Article 93C of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

Guarantees
Article 17A of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining provides interesting and valuable guarantees, at least in principle. The law provides that the Central Government and the Regional Government guarantee that there will be no changes to the spatial and area benefits granted to the holder of a particular WIUP; and that all other related and necessary licenses will be issued in the framework of implementation of Mining Activities in a Mining Business License Territory for metal Minerals and Coal (provided that all conditions stipulated in relevant regulations of law in effect are fulfilled). (Article 17A(2) and (3) of Law 3/2020 amending Law 4/2009 on Mineral and Coal Mining).

 

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