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Wednesday, 02 March 16
RE-EVALUATION OF MINING LICENSES CLEAN AND CLEAR STATUS IN INDONESIA

SSEKCOALspot.com: In connection with the transfer of mining authority from Regents/Mayors to Governors1 and from Regents/Mayors and Governors to the Indonesian Minister of Energy and Mineral Resources ("MEMR")2 pursuant to the New Regional Government Law3, the MEMR is conducting another review of existing mining licenses (known as IUPs) previously issued by Regents/Mayors and Governors. 

MEMR Regulation No. 43 of 2015 regarding Procedures for Evaluation of Issuance of Mineral and Coal Mining Business License ("MEMR 43/2015") sets forth the requirements for IUPs to be declared Clean and Clear ("CNC"), meaning they have been validly issued and conform to the requirements of the Mining Law. The requirements and consequences for failure to satisfy them are as follow:

 

Requirements Consequence for Failure
application for renewal or upgrade of IUP must be submitted within its term of validity revocation of IUP
area reservation and KP (former form of IUP) application must be approved prior to the issuance of the Mining Law  revocation of IUP
application for area reservation must not overlap with any active COW, CCOW, KP or IUP area for the same mining commodity revocation of IUP
Exploitation KP must derive from an upgraded Exploration KP revocation of IUP
except in the case of a public company, a company must not have more than one IUP
(i) issuance of single IUP consolidating IUPs the areas of which are adjacent to each other, for the same mining commodity and in the same stage (exploration or production); or
(ii) transfer of IUPs to 51% owned subsidiary(-ies) 
IUP term of validity must not exceed the period prescribed under the Mining Law adjustment of IUP's term of validity
IUP area must not overlap with other IUP areas for the same mining commodity or National Reservation Area or other regency/city/province area
(i) reduction of area reflecting partial overlap; or
(ii) revocation of IUP if the overlap covers the whole IUP area4
Exploration IUP's coordinates must be in accordance with the area reservation
(i) change of coordinates if there is partial non-conformance to the area reservation or Exploration IUP’s coordinates, as relevant; or
(ii) revocation of IUP if the entire IUP area does not conform to the area reservation or Exploration IUP’s coordinates
Production Operation IUP's coordinates must be within the Exploration IUP's coordinates
(i) change of coordinates if there is partial non-conformance to the area reservation or Exploration IUP’s coordinates, as relevant; or
(ii) revocation of IUP if the entire IUP area does not conform to the area reservation or Exploration IUP’s coordinates
IUP's coordinates must be straight lines parallel to latitude and longitude adjustment of IUP's coordinates

MEMR will only issue CNC Certificates to mining companies which have submitted the following documents:

1. exploration report and, if applicable, feasibility study report;
2. environmental documents, i.e. AMDAL or UKL-UPL; and
3. evidence of payment of dead rent and, if applicable, royalty.

Failure to submit the above documents may result in administrative sanctions in the form of written warnings, temporary suspension of mining activities or revocation of IUP.  
By: Michael S. Carl & Florence G. Santoso
 
1(Applies to domestic mining companies having a mining area located within one province)
2(Applies to (i) domestic mining companies having a mining area located in more than one province and (ii) all foreign-owned mining companies)
3(Law No. 23 of 2014 regarding Regional Government, as lastly amended by Law No. 9 of 2015)
4(In the event of overlap between IUPs having the same mining commodity, first come, first served applies, based on the date of submission of application and satisfaction of all requirements.)

(This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user’s own risk)

Michael S. Carl About Michael S. Carl
Michael S. Carl is a foreign legal advisor at SSEK Legal Consultants, where he is a supervising advisor for the firm’s mining practice.

He specializes in mining, energy, infrastructure, finance, insolvency and restructurings, and M&A.

Michael is named by Who’s Who Legal as one of Indonesia’s leading mining lawyers and he has been recognized as a leading lawyer by Chambers Global, IFLR 1000 and Asialaw.



Florence G. SantosoAbout Florence G. Santoso
Florence G. Santoso is experienced in energy, infrastructure, investment and mergers and acquisitions, and has been involved in a number of acquisitions involving industrial and trading companies.

Since joining SSEK Legal Consultants in 2010, Florence has been involved in numerous major mining transactions.


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