Monday, November 03, 2008

Slight View on the Mining Law in Practice

The Mining Law in Indonesia regulates :
  1. Ownership
  2. Grouping of minerals according to their importance
  3. The way mining will be conducted by different parties
  4. The role of the Local Government
  5. The way in which mineral development can be licenced or authorized.
  • As regulated under the Mining Law, minerals are divided into 3 Groups based on the historic role, present and the future potential and possible economics significances each of such minerals to the state and the people. These grouping are being determined by a Government Decree from time to time.
  • The Groupings in general are divided into Group A : namely the Strategic Minerals.
  • Under this Strategic Minerals are among others : oil, asphalt, wax, natural gas, coal, brown coal uranium, radium, and other radioactive minerals, nickel, cobalt, tin .
  • Following thereafter is the Grouping B which is the Vital Minerals. This Vital Minerals among others are : iron, manganese, copper, lead, gold, silver, platinum, diamond, silver, mercury, sulphur.
  • These groupings of mineral shall have impacts on the issuance of the mining licenses and /or royalties.
  • While C Minerals are handled by the Provincial Governments. These C Minerals are usually relating to among others limestone, sand, gravel which are developed under a Regional Mining Permit ( Surat Izin Pertambangan Daerah or SIPD) which is issued by the Governor and can cover an area of 25 ha.
Based on the Mining Law, the Mining of Strategic Minerals can only be undertaken by a government agency appointed by the Minister or a state enterprise. Mining can be licensed or authorized in 5 ( five) ways :
  • 1. Ministerial Assignmentt to carry out mining by government bodies or agencies ( Penugasan Penambangan) as in the case of BATAN which is the atomic energy agency being assign to carry out the development of radioactive minerals.
  • 2. Issuance of Mining Authorization ( Kuasa Pertambangan or KP). This KP are granted to Mining Companies (sate or private) or to Indonesian Individuals.
    • As we are aware there are different stages of Mining Authorization which can be applied for.
    • In applying the Mining Authorization, we have to submit the required maps and other administrative requirements.
    • In practice the Mining Authorization will be given for a limited time. Reasoning of this is usually related to guarantee the seriousness of the applicant / the right holder in performing its obligations. If such right holder is not performing any exploration activities for a certain period of time, in a certain Area, the potential minerals in such location will be idle, which on the other hand, can actually can be explored, exploited by the other more serious mining companies to produce the mineral products.
  • 3. Contracts for Foreign or Domestic Companies ( Contract of Work or Coal Cooperation Contract). This is based on regulations under the Mining Act combined with the Foreign Investment Act.
  • 4. License or Permit for People's Mining. This License is granted to small traditional or manual mining operations which are using simple equipment and technology. Usually it is conducted in a small scale or through mutual cooperation using simple tools and equipments.
  • 5. Authorization by District Government ( Surat Ijin Pertambangan Dearah - SIPD) This usually in practice applies to Group C Minerals.
  • From my experience, as In house Legal Counsel in a Mining Company who conducts Mining Operations in Copper, such Company, who operates in Indonesia under a Contract Of Works ( Licence/Authorization) needs a certain volume of limestone for processing its product in the Mill Plant. The Company who conducts the limestone operation holds the Group C Minerals license issued by the Local Government.
  • This Limestone Company was granted work by the Copper Mining Company to manage the usage and supply of the limestone in the Mill Plant. Exiting isn't it.
  • Thus, in practice, you may found situation in the field operation at Site, where a cooperation mechanism, may arise between the Big Cooper Mining Company who is exploring, exploitation and producing the Cooper Mineral which falls under the Group B Vital Minerals, and the Limestone Mining Company who is granted the Authorization by the District Government for its C Mineral of Limestone.
Well, the above is a slight view of the Mining Law and its real implementation in the real practice operations which you may find in the Mining Field Operations in Indonesia, which hopely will be usefull for you readers who are interested in reading Legal aspects related to Mining Operations in Indonesia. Date : November 1 , 2008

Agung Supomo Suleiman

Senior Partner Law Firm Suleiman Agung & Co

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