REGULATION UPDATE REGARDING IMPLEMENTATION OF MINERAL AND COAL MINING BUSINESS ACTIVITIES

As part of the Government of the Republic of Indonesia's commitments to investment certainty and public welfare in the mining sector, the Government enacted Government Regulation Number 25 of 2024 on Amendments to Government Regulation Number 96 of 2021 on the Implementation of Mineral and Coal Mining Business Activities ("GR 25/2024"), that has been in effect since 30 May 2024.

Through GR 25/2024, the government provides several amendments, as follows:

1. Work Plan and Cost Budget ("RKAB")
   One of the most significant changes introduced by GR 25/2024 is the amendment of the name of RKAB from Annual RKAB into RKAB. The changes align with the Regulation of the Minister of Energy and Mineral Resources No. 10 of 2023, which stipulates that the RKAB for the exploration phase is prepared for one year and the production operation phase is prepared for three years, or depending on the validity of the mining license. The changes give the mining license holder in the exploration phase less administrative work, and be able to concentrate on its business efficiently to get more profit.
2. Special Mining Business License Areas ("WIUPK") for Religious Community Organization
   WIUPK is a business permit issued for mining activities in certain strategic and vital areas designated by the government to access resources in regions deemed significant for the national interest.
   
   Previously, the permit was prioritized for State-Owned Enterprises/Badan Usaha Milik Negara ("BUMN") and Regional-Owned Enterprises/Badan Usaha Milik Daerah ("BUMD") to ensure that the benefits from WIUPK remained within the public sector, to support national and regional development goals. GR 25/2024 introduces a pivotal change by offering WIUPK in priority to business entities owned by religious community organizations ("Religious Community Entity") with the following conditions:
   
   
   • WIUPK must be formerly the areas of Coal Contract of Work ("PKP2B").
   • The religious community organizations must hold the majority and controlling interest in the Religious Community Entity that holds the WIUPK.
   
   However, Article 83A of GR 25/2025 imposes the following prohibitions:
   
   
   • The Religious Community Entity that holds WIUPK is prohibited from collaborating with previous PKP2B holders and/or their affiliates.
   • The IUPK and/or the shares owned by religious community organizations in the Religious Owned Entity shall not be transferred or assigned without the approval of the Ministry of Energy and Mineral Resources of Indonesia.
   
   The aforementioned WIUPK offering will be valid within five years from the enactment date of GR 25/2024 (from 30 May 2024 to 30 May 2029). After 2029, the WIUPK may still be offered to Religious Owned Entity; however, it will no longer receive any priority privileges and will be subject to the auction process according to the applicable laws.
   
   
3. Extension of Mining Business License for BUMN's Subsidiaries.
   Recognizing the strategic importance of BUMN and its subsidiaries in the mining sector, GR 25/2024 provides specific provisions for extension of Mining Business Permits (IUP) or Special Mining Business Licenses (IUPK) ("Mining Permits") of BUMN's subsidiaries for period of 10 years at each renewal. Therefore, with predictable extension terms, BUMN's subsidiaries are likely to attract more investments, both domestic and international, fostering growth and development within the mining sector.
   
   
4. Shareholding Composition under Production-Operation Mining Permits
   To ensure domestic participation and control over mining activities, GR 25/2024 imposes the entities hold IUP for operation and production activities integrated with processing and/or purification facilities or development and/or utilization facilities must maintain at least 30% (thirty percent) of non-dilutable shares ownership by the IUP holders, whether directly or indirectly, with the following criteria:
   
   
   • the relevant processing, purification, development, and/or utilization activities must be actively conducted by the respective permit holder;
   • there must be sufficient reserves to support the operational needs of the (i) processing and/or purification facilities for metal commodities, and (ii) development and/or utilization facilities for coal commodities;
   • specifically for coal commodities, to comply with the regulations regarding the type of development and/or utilization activities and meet the minimum percentage threshold for coal production.
   
   
5. Extension IUPK as Operation Continuation
   Previously, Production-Operation IUPK was valid only until their specified expiration dates. However, GR 25/2024 has introduced a significant change, reclassifying these ProductionOperation IUPK as a Continuation of the Contract/Agreement Operation ("Continuation IUPK"). This adjustment aims to enhance investment certainty for holders of IUPK issued before the enactment of Law No. 4 of 2009 on Mineral and Coal Mining, as lastly amended by Law No. 3 of 2020, provided that these holders possess sufficient reserves to support the operational requirements of their processing and/or refining facilities and demonstrate a commitment to new investments through ongoing exploration and the expansion of refining capacity. Any Production-Operation IUPK is now eligible for renewal upon the satisfaction of specific criteria, as follows:
   
   
   • possess integrated domestic processing and refining facilities;
   • have sufficient reserves to meet the operational needs of the processing and/or refining facilities;
   • at least 51% (fifty-one percent) of the shares are owned by Indonesian participants;
   • have entered into a non-dilutable shares purchase agreement with a BUMN for at least 10% (ten percent) of the total share ownership;
   • measures to increase state revenue;
   • commit to a new investment in the form of:
     • advanced exploration activities; and
     • increase the capacity of refining facilities, with approval from the Minister.
   
   Consequently, the Production-Operation IUPK that meets the abovementioned criteria is now eligible for renewal for a period of 10 years per extension. The renewal must be submitted at least one year before the expiration of the existing permit, ensuring compliance with regulatory requirements and continued operational stability.
   

Conclusion

The Indonesian government has taken decisive steps to enhance efficiency, inclusivity, and legal certainty within the mineral and coal mining sector through the enactment of GR 25/2025. GR 25/2024 brings several key changes, including the introduction of a new pathway for religious community organizations to obtain WIUPK, which was previously prioritized only for BUMN or BUMD. Lastly, the regulation outlines stringent criteria for the extension of Production-Operation IUPKs, enhancing operational stability and regulatory compliance.

GR 25/2024 represents a pivotal development in Indonesia's mineral and coal mining regulatory landscape. By addressing key areas such as investment certainty, domestic participation, and regulatory compliance, the government demonstrates its commitment to fostering a more efficient, inclusive, and legally certain mining sector. This proactive approach is anticipated to attract substantial investments, promote sustainable growth, and ensure that the benefits of mining activities are equitably distributed among all stakeholders, thereby supporting national development goals.

Note: The content of this article does not constitute legal advice and should not be relied upon since there will be implemented regulations to be further issued. The judge’s opinion may also be different, due to the facts relevant to the case. If you need specific advice related to this topic, please contact us by email at info@yangandco.com.