INDONESIAN MINING LAW - Holman Fenwick Willan

Mining
February
2012
INDONESIAN MINING LAW
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.
Coal pricing for mine mouth power plants
The Director General of Minerals and Coal (the
Director General) has recently issued Regulation
Pricing
Below the benchmark price as approved by
the Director General.
Production cost + a margin of 25% from the
production cost.
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 coal price for mine mouth power plants is
determined by the Director General by using the
following formula:
Type of coal
• Calorific value ≥ 3.000 kcal/kg (GAR basis).
• Calorific value < 3.000 kcal/kg (GAR
basis).
• Calorific value ≥ 3.000 kcal/kg (GAR basis)
but uneconomical for outside-mine sale.
• Used for mine mouth power plants in a
production process.

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.
“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.”
02 Mining
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.
News
Brian Gordon moves to HFW
Singapore
On 1 February 2012, HFW Corporate
Mining and Energy Partner Brian
Gordon moved to HFW’s office in
Singapore, to strengthen the firm’s
resources sector capability in the
Asia-Pacific region.
HFW team attends Indaba
From 6-9 February 2012, HFW
Partners, Chris Swart, Nick Hutton,
Brian Gordon, Rory Gogarty and
James Donoghue will be attending
this annual conference.
For further information or to register
to attend this event please visit:
http://www.indaba-southafrica.co.za/
HFW mining seminar in November
2011 in London
On 17 November 2011, HFW, in
association with Moore Stephens LLP
and KBC Advanced Technologies
plc, hosted a mining seminar aimed
at companies wishing to raise and
provide finance in the sector. The
seminar covered: raising corporate
finance and due diligence with a
particular focus on UK corporate
governance and the resources sector
- is the UK a soft touch? Over 50
clients attended.

HFW wins award for customer
satisfaction
In November 2011, Legal Week
magazine published its annual Client
Satisfaction Report. In the 8th annual
survey, HFW received the highest
ranking of major London-based firms
outside the top 10, with an average
score of 8.32 out of 10. The survey
of major law firms operating in the
UK is based on feedback from 1,069
companies, including 78% of the
FTSE 100.
For more information,
please also contact:
Chris Swart
London Partner
T: +44 (0)20 7264 8211
chris.swart@hfw.com
Robert Follie
Paris Partner
T: +33 (0)1 44 94 40 50
robert.follie@hfw.com
Konstantinos Adamantopoulos
Brussels Partner
T: +32 2 535 7861
konstantinos.adamantopoulos@hfw.com
Jeremy Davies
Geneva Partner
T: +41 (0)22 322 4810
jeremy.davies@hfw.com
Edward Newitt
Dubai Partner
T: +971 4 423 0555
edward.newitt@hfw.com
Brian Gordon
Singapore Partner
T: +65 6305 3533
brian.gordon@hfw.com
Richard Wilmot
Hong Kong Partner
T: +852 3983 7600
richard.wilmot@hfw.com
Henry Fung
Shanghai Partner
T: +852 3983 7777
henry.fung@hfw.com
Chris Lockwood
Melbourne Partner
T: +61 (0)3 8601 4508
chris.lockwood@hfw.com
Stephen Thompson
Sydney Partner
T: +61 (0)2 9320 4646
stephen.thompson@hfw.com
James Donoghue
Perth Partner
T: +61 (0)8 9422 4705
james.donoghue@hfw.com
Jeremy Shebson
São Paulo Partner
T: +55 (11) 3179 2903
jeremy.shebson@hfw.com
Mining 03

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