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INDONESIAN MINING LAW - Holman Fenwick Willan

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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


Lawyers for international commerce

HOLMAN FENWICK WILLAN

3 Church Street

#19-03 Samsung Hub

Singapore 049483

T: +65 6534 0195

F: +65 6534 5864

© 2012 Holman Fenwick Willan LLP. All rights reserved

Whilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not be

considered as legal advice.

Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences please

contact Craig Martin on +44 (0)20 7264 8109 or email craig.martin@hfw.com

hfw.com

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