Circular on Mining Permits prior to issue of implementing regulations

On 12 January 2009, Law No. 4 of 2009 concerning Mineral and Coal Mining Law (the New Mining Law) came into effect in Indonesia replacing Law No 11 of 1967 concerning Mining (the Old Mining Law).

As set out in our recent SE Asia Update, the New Mining Law ‘abolishes’ the system of mining rights under Contracts of Work (COWs), Coal Contracts of Work (CCOW) and Kuasa Pertambangan (KPs), and introduces a new system of mining permits including Izin Usaha Pertambangan (IUP) (Mining Business Licences). 

While including some savings and transitional provisions for COWs and CCOWs, the New Mining Law makes no mention of the continuity of KPs so there has been uncertainty about the status of KPs and the transition of these rights into the new system.

 

Circular of DGMCG - status of KPs, “moratorium” on IUPs

To assist with the transition between the Old Mining Law and New Mining Law the Directorate-General of Minerals, Coal and Geothermal (the DGMCG) released Circular No.03.I/31/DUB/2009 on 30 January 2009 (the Circular). 

 

While not a law, the Circular provides guidance and direction to relevant government officers (including the Regencies). The Circular includes the following provisions:

· KPs including any upgrades issued under the Old Mining Law are valid until their term expires and will be converted to IUPs by 12 January 2010;

 

· KPs issued after 12 January 2009 shall be null and void;

 

· no IUPs shall be issued until supporting regulations under the New Mining Law have been published;

 

· Governors and Regents must submit to the DGMCG within 1 month of the Circular, all applications for KPs where a preliminary exploration permit (Surat Keterangan Izin Peninjauan) (SKIP) was obtained and the KP application was lodged prior to 12 January 2009 (commencement of the New Mining Law).  

 

These applications will be evaluated and verified to determine Mining Operation Permit Areas (WIUPs) under the New Mining Law;

· KP holders which have already commenced exploration or exploitation must submit activity plans for the entire KP concession area to the issuer of the KP, copied to DGMCG, within 6 months of 12 January 2009 (commencement of the New Mining Law);

 

· applicants who applied for a COW or CCOW under the Old Mining Law (before commencement of the New Mining Law) are required to form Indonesian entities by 12 July 2009 to have their applications processed as IUPs under the New Mining Law.

 

Our comments

One effect of the Circular is to impose a “moratorium” on the issue of new mining rights in Indonesia - a suspension of the grant of new mining rights until relevant supporting regulations under the New Mining Law commence.

Holders of existing mining rights in the form of KPs have some claim to certainty that the mining rights and upgrades continue until their expiry. However this and several other matters dealt with under the Circular are open to interpretation and where Regents and other officers can be subject to penalties (including incarceration) 

for breach of the New Mining Law, they may be conservative in applying the Circular.

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