This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia: UU Pertambangan Mineral dan Batu Bara: Babak baru sektor tambang
13 May 2020
By: Yanita Petriella, Finna U. Ulfah, and Muhammad Wildan
Bisnis, Jakarta – The passing of the Mineral and Coal Mining Law has become a magnet that attracts mining contract (PKP2B) holders to reinvest, especially in exploration after it has been inactive for some time.
Yesterday, on Tuesday (12/5), the House of Representatives (DPR) had revised Law No. 4/2009 on Mineral and Coal Mining, approved by House Speaker Puan Maharani.
Through the regulation, mining players – especially seven first generation PKP2B holders with contracts ending soon – will receive legal certainty. Through the new legal umbrella, exploration funds allocated by mining corporations will no longer be lacking.
Referring to the data from the Energy and Mineral Resources Ministry, the amount of investment in exploration made by mining corporations is only 3% of the total investment of the companies. The amount is far smaller than the amount of investment in exploration made by mining corporations globally.
Last year, the investment only reached US$274 million, and the investment is forecasted to reach US$300 million this year, even though without exploration, it will be difficult to secure new reserves.
Indonesian Coal Mining Association (APBI) Executive Director Hendra Sinadia stated that this new regulation would provide a long-term certainty in the mining sector. This law will provide legal certainty, especially for companies looking to extend their mining contracts. Until now, investors tend to be conservative in investing as there is no certainty on the extension of their PKP2B.
According to him, players need certainty of the extension as they must make sure that they can continue production after exploration. If this process stopped, he added, then the investment would be gone.
In the Mineral and Coal Mining Law, there is a regulation that states activities must continue through mineral and coal reserve endurance funding obligation to secure new reserves.
“With the regulation, investment in exploration that has been stagnant since 2016 can bounce back. Certainty for long-term business that has been demanded by players can be seen in this regulation,” Hendra said on Tuesday (12/5).
He reckoned that, soon, there would be an increase of investment exploration from mining companies with PKP2B as they were already operational, so they have a calculation for the operating costs of exploration, production, and post-mining activities.
This new regulation is approved by Indonesian Mining Association (IMA) Chairman Ido Hutabaharat, which boosts the confidence of mining players amid the Covid-19 pandemic to invest, especially in exploration.
“The problem has been players reluctant to carry out exploration and withholding their exploration fund as there is no legal certainty on the operation extension, even though exploration takes a long time,” he explained.
Echoing the statement, Indika Energy Group CEO Aziz Armand said that the revision to the Mineral and Coal Mining Law provided legal certainty and affected fundamental investments in every business activity positively, including investments in mining with high risks and mining that required large capital.
“With it being passed, the regulation will provide certainty on Kideco mining contract extension, which is valid until 13 March 2023, in line with the applicable regulation,” he said.
Meanwhile, PT Adaro Energy Tbk President Director Garibaldi Thohir stated that his company would propose to extend the operation of its subsidiary – PT Adaro Indonesia – next year.
Adaro holds a first generation PKP2B which will be expired on 1 October 2022.
Energy and Mineral Resources Minister Arifin Tasrif admitted that he was glad that the Mineral and Coal Mining Law had been passed by the House. According to him, the new legal umbrella will slowly resolve mining management problems.
The Minister added that several regulations in the Mineral and Coal Mining Law could boost investment in the mining sector. The regulations increase added value, exploration, reclamation and post-mining activities, and set a minimum of 51% divestment.
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