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The Government of the Republic of Indonesia issued the Government Regulation No. 96 of 2021 on regarding the Implementation of Mineral and Coal Mining Business Activities dated 9 September 2021 (GR 96/2021). GR 96/2021 is issued as the implementation to Law Law No. 11 of 2020 on Job Creation dated 5 October 2020 that amends Law No. 4 of 2009 on Coal and Mineral Law (Mining Law).

GR 96/2021 stipulates several provisions that are considered as significant changes from the previous government regulation namely Government Regulation No. 23 of 2010 concerning the Implementation of Mineral and Coal Mining Business Activities as lastly amended by Government Regulation No. 8 of 2018 on the fifth amendment of Government Regulation No. 23 of 2010 concerning the Implementation of Mineral and Coal Mining Business Activities (GR 23/2010).

This update will discuss several critical changes in the GR 96/2021 in connection with the implementation of mineral and coal mining business activities, including (i) business licensing, (ii) tender system; and (iii) divestment obligation.

Business Licenses

GR 96/2021 stipulates that mining business activities must be carried out based on a Business Licensing which is the authority of the Central Government through the OSS (Online Single Submission) system, which is carried out through the granting of the following:

License as mentioned in point 3 above is a license depends on the type of mining business activities which consists of:

For information, IUP which consist of IUP Exploration and IUP Production Operation (IUP- OP) are granted by the Minister of Energy and Mineral Resources (MEMR) based on the application submitted by:

IUP cannot be granted to individuals with Indonesian citizenship (WNI), but for IUPs that were previously intended for WNI, they are still valid until the expiration of such license.

Mining Service Business (Usaha Jasa Pertambangan)

IUP or IUPK holders are required to use local and/or national mining service companies, that provide mining services in connection with consultation, planning, and implementation for activities in the following fields:

Thereafter, IUP and IUPK holders may use mining service companies that are Indonesian legal entities in the context of foreign investment (PMA) if no local and/or national mining service companies are technically and/or financially capable of carrying out these activities properly. The use of PMA mining service companies can be carried out after the IUP and IUPK holders make announcements through local and/or national mass media.

Mining Business Licensing for State-Owned Enterprises (BUMN)

GR 96/2021 also regulates IUPs for BUMN. This regulation stipulates that some areas of mining business permit area (WIUP) that are used for the Production Operation (OP) by BUMN can be transferred to another business entity, which 51% (fifty one percent) or more of its share ownership is owned by BUMN holding IUP whose WIUP will be transferred. Moreover, the ownership of BUMN shares in other Business Entities cannot be diluted to less than 51% (fifty one percent).

However, this transfer can be carried out after obtaining approval from the MEMR. Further, the implementing requirements will be further explained in a MEMR regulation

Granting of Metal Mineral Business Permit Areas through Auction

Mining Business Permit Areas (WIUP) consists of:

Metal Mineral and Coal WIUP can be carried out through auction, in which MEMR publicly announces the auction plan within a period of no later than 14 (fourteen) calendar days or at the latest 60 (sixty) calendar days prior to the auction.

Announcement of the plan for the auction of metallic Mineral WIUP or Coal WIUP can be carried out openly with the following provisions:

Provisions regarding Share Divestment

Business Entities holding IUP and IUPK at the Production Operation step for PMA are required to divest shares of at least 51% (fifty-one percent) in stages to the Central Government, Regional Government, BUMN, BUMD, and/or National Private Business Entities.

On the previous provisions, which was Government Regulation No. 1 of 2017 on the Fourth Amendment of GR 23/2010 (GR 1/2017), requires all PMA as a holders IUP and IUPK that after 5 (five) years of operation are required to divest their shares in stages so that in the tenth year, at least 51% (fifty one percent) is owned by locals.

The obligation to divest shares for IUP and IUPK holders at the Production Operation step is regulated with the following provisions:

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Implementation of Mineral and Coal Mining Business Activities - Lexology