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Indonesian mining law

The Director General of Minerals and Coal (the Director General) has recently issued Regulation No 1348.K/30/DJB/2011, which deals with the pricing of coal for mine mouth power plants (DGR No 1348 of 2011). The effect of this provides an exception to the benchmark pricing requirements.

The end of 2011 and the beginning of 2012 have seen the introduction of several mining related regulations. This briefing sets out some of the key changes under these new regulations

The coal price for mine mouth power plants is determined by the Director General by using the following formula:

Formula

Adjusting existing contractual arrangements

Existing contractual arrangements in respect of coal prices for mine mouth power plants entered into prior to the issuance of DGR No 1348 of 2011 will now need to be adjusted within six months from the issuance of DGR No 1348 of 2011. Advice should be sought to ensure you understand what your existing arrangement is.

New tariff for deadrent and royalties

In addition, the Government has introduced a new tariff to deal with the payment of deadrent and royalties under Government Regulation No 9 of 2012, which came into effect from 6th of January 2012. The new deadrent tariff is now between USD 2.00 to USD 4.00 per hectare/annum, depending on the Mining Business Permit (IUP) held by the company. The new royalty tariff is now in the range of 1.50% and 7.00% per tonne from the sale price, depending on the type of the commodity.

Evaluation Team for the adjustment of contracts of work

The Indonesian Government will once again attempt to adjust the provisions under the existing Contracts of Work (CoW) so as to put them in line with the Mining Law, by forming an Evaluation Team which consists of ministers from various departments. As part of this effort, the Evaluation Team, as provided under the Decree of the President of the Republic of Indonesia No 3 of 2012, will be tasked with:

  • Evaluating the provisions under CoW which may need to be adjusted so as to comply with the Mining Law.
  • Determine the necessary steps to settle the mining areas and state revenue, as a standing position of the Government in renegotiating the adjustment to CoW.
  • Determine the necessary steps for the compliance of the holders of CoW in respect of processing and refining of minerals or coal.
  • The Evaluation Team will carry out its work from the 10th of January 2012 to December 2013. These efforts demonstrate the importance that the Government continues to place in a fast-paced-growing mining sector that follows legislation changes for the last three years.

    For more information, please contact Brian Gordon, Partner, on +65 6305 3533 or brian.gordon@hfw.com, or James Donoghue, Partner, on +61 (0)8 9422 4705 or james.donoghue@hfw.com, or your usual HFW contact.

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