REGULATORY UPDATE ON MINING

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Presented in Indonesia Miner

Jakarta 11 April 2018

The Westin Hotel

REGULATORY UPDATE ON MINING

www.armilarako.comPhone : 021- 2911 0015 | e-mail: [email protected]

Mining Regulatory Progress in 2018R

evo

ked

• MEMR Regulation No. 12 Year 2011





• MEMR Decree No. 1453 Year 2000

• MEMR Decree No. 0617 K/32/MEM/2011

• MEMR Decree No. 2555.K/201/M.PE/1993






• MEMR Decree No. 1614 Year 2004

• DGMC Regulation No. 714.K/30/DJB/2014

• DGMC Regulation No. 842.K/30/DJB/2015

Am

en

ded

• Government Regulation No. 8 Year 2018


New

Reg

ula

tio

n • Presidential Regulation No. 13 Year 2018

• MEMR Regulation No. 11 of 2018

• MEMR Decree No. 1395 K/30/MEM/2018 as amended by MEMR Decree No. 1410K/30/MEM/2018

• MEMR Decree No.23K/30/MEM/2018


The following regulation are revoked:

a. MEMR Regulation No. 12 Year 2011 concerning Procedure for Determination of Mining Area and Information

System of Mineral and Coal Mining Area

b. MEMR Regulation No. 28 Year 2013 concerning Procedure for Auction of Mining License Area and Special Mining

License Area in Metal Mineral and Coal Mining Business Activities

c. MEMR Regulation No. 25 Year 2016 concerning Amendment of MEMR Regulation No. 12 Year 2011

d. MEMR Regulation No. 34 Year 2017 concerning Licensing in the Filed of Mineral and Coal Mining

e. MEMR Regulation No. 15 Year 2017 concerning Procedure for Granting of Production Operation Special Mining

License as Continuation of COW and CCOW Operation

f. MEMR Decree No. 1453 Year 2000 concerning Technical Guidelines for Implementation of Government Obligation

in the Field of General Mining

Regulations on Mining that are Revoked


g. DGMC Regulation No. 714.K/30/DJB/2014 concerning Procedure and Requirement for Granting the

Recommendation of ET-Coal

h. DGMC Regulation No. 842.K/30/DJB/2015 concerning Procedures and Requirements for granting the

Recommendation of ET-Tin and Export Approval of Pure Tin

i. MEMR Decree No. 0617 K/32/MEM/2011 concerning Coal Price for PT PLN in order to Operation of Steam Power

Plant

j. MEMR Decree No. 2555.K/201/M.PE/1993 concerning Implementation for Mining Inspection of General Mining

Field

k. MEMR Decree No. 103.K/008/M.PE/1994 concerning Supervision on the Implementation of Environmental

Management Plan and Environmental Monitoring Plan in the Field of Mining and Energy

l. MEMR Decree No. 620.K/008/M.PE/1994 concerning Environmental Impact Analysis Commission of Mining and

Energy Department



m. MEMR Decree No. 2202.K/201/M.PE/1994 concerning Granting of Preliminary Investigation Letter in Order to

Foreign Investment or Domestic Investment in General Mining Sector

n. MEMR Decree No. 134.K/201/M.PE/1996 concerning Utilization of Maps, Explanation of Limit and Area of Mining

Rights, COW, and CCOW in the Field of General Mining

o. MEMR Decree No. 135.K/201/M.PE/1996 concerning Verification of Capability and Ability of Applicant of Mining

Rights, COW, and CCOW

p. MEMR Decree No. 1614 Year 2004 concerning Guidelines for Processing of COW and CCOW Applications in

order to Foreign Investment



The following regulation are amended:

a. Government Regulation No. 8 Year 2018 concerning Fifth Amendment of Government Regulation No. 8 Year 2010

on The Implementation of Mineral and Coal Mining Activities

This Regulation insert Article 85A which regulates the coal sale price determination by MEMR with respect to the

fulfillment of the needs of coal for the domestic.

b. MEMR Regulation No. 19 Year 2018 Concerning Second Amendment of MEMR Regulation No. 19 Year 2018 on

Procedure for Determination of Sale Benchmark Price of Metal Mineral and Coal

This Regulation insert Article 8A which regulates the authority of MEMR to determine the coal sale price for

domestic needs. This regulation further stipulates that the selling price shall be determined in accordance with the

coal quality and public interest.

Regulations on Mining that are Amended


Main points under the MEMR Regulation No. 11 of 2018 concerning Procedures of Granting of Mining

Area, Licensing, and Reporting of Mineral and Coal Mining Business Activities:

A. Revocation and/or simplification of license, recommendation and license requirement

B. Granting of the Mining Area (WIUP/WIUPK)

C. Transitional provisions

New Regulations1. MEMR Regulation No. 11 Year 2018


A. Revocation and/or Simplification of License, Recommendation, and License Requirement


No. Type of License / Recommendation /

Approval / License Requirement

Explanation

1. Registration Certificate for Transportation and Sale

(TR)

Changed and become IUP OPK for Transportation

and Sale

2. Principle License for Processing and Refining Revoked and only issue IUP OPK for Processing

and Refining

3. Recommendation for Foreign Workers Revoked and directly submit to the Ministry of

Manpower and Transmigration

4. RKAB of IUJP RKAB in accordance to the contract with IUP/COW/

CCOW holder






Explanation

5. RKAB of IUP OPK for Transportation and Sale Revoked

6. Certification of equipment Revoked

7. Recommendation for ET-Coal Revoked

8. Recommendation for ET-Tin Revoked

9. Recommendation for Approval Letter of Tin Export Revoked






Explanation

10. Certification of Technical Personnel Revoked

11. Certification of Clean and Clear Revoked

12. Approval for Exploration Report Revoked

13. Approval for changes in investment and financing

plan, included the change in paid up capital and

subscribed capital

Included in RKAB






Explanation

14. License for Transportation, Storage/Stockpiling, or

Explosive Utilization and Recommendation for

Purchase of Explosive

Included in RKAB

15. License for Construction of Storage/Stockpiling of

Liquid Fuels

Included in RKAB

16. Approval for the Execution of Sleep Blast Included in RKAB

17. Installation Feasibility Certificate Included in RKAB

18. Approval for Dredger Operation Plan Included in RKAB






Explanation

19. Recommendation for Import, Re-Export, Temporary

Import Facility

Included in RKAB

20. Recommendation for Import Identification Number of

Producer (API-P)

Included in RKAB

21. Approval for Coal Blending Activities from IUP, IUP

OP, or IPR

Included in RKAB

22. Approval for Analysis Method of Determination of

Free Silica Content in Dust

Revoked

23. Approval for Special Measurer of Underground Mines Revoked






Explanation

24. Approval for Undercutting Excavation on Surface

Mine

Revoked

25. Approval for Safety Implementation Guideline Revoked

26. Approval for High Levels more than 20 meters on

Layers Containing Sand, Clay, Gravel, and Other

Materials

Revoked

27. Approval for High Levels more than 15 meters on

Compact Material Layers

Revoked






Explanation

28. Registration Certificate (SKT) Revoked

29. Approval for Education and Training Program held by

KTT

Revoked

30. Approval for Mine Mouth Power Plant Price Revoked

31. Approval for Change in Equipment Construction of

Land Mover

Revoked

32. Approval for Addition and Reduction of Natural Buffer

Size on Underground Mine

Revoked






Explanation

33. Approval for Utilization of Natural Ventilation on

Underground Mine

Revoked

34. Approval for Installation or Utilization of Electrical

Equipments for the Detection or Measuring of

Flammable Gases

Revoked

34. Approval for Lighting of Underground Mine Workers Revoked

35. Approval for Measurement Procedures and

Measurements Equipments of Radon Derived

Concentrations or Alpha Radiation Energy

Revoked






Explanation

36. Approval for Inspection Standard of Gamma

Radiation

Revoked

37. Approval for Utilization of Portable Electrical Light on

Hazardous Mines of Gases

Revoked

38. Approval for Detection Equipments of Methane

Gases on Underground Mine

Revoked

39. Validation for Underground Mining Closure Revoked






Explanation

40. License for Utilization of Electrical Weld on

Underground Coal Mine or Mine Area which contains

Flammable Gases

Revoked

41. Approval for Breathing Apparatus Revoked


B. Granting of the Mining Area (WIUP/WIUPK)

There are several changes for granting the WIUP/WIUPK, which are:

1. In the event of the Governor is granting the non-metal mineral or rock WIUP, then it shall obtain a recommendation from the

Regent/Mayor. The recommendation is granted by Regent/Mayor within 5 working days from the receipt of the application

and if the recommendation is not issued within 5 days, then the recommendation is deemed granted.

2. The recommendation from the Regent/Mayor regarding the issuance of non-metal mineral or rock WIUP is containing land

use information, and conformity to the mining designated area.

3. The issuance of metal mineral, non-metal mineral, coal and rock WIUP in which there is a radioactive WUP, then shall obtain

a recommendation from government institution in the field of nuclear

4. The auction announcement shall be made no later than 1 month prior to the auction (in the previous regulation, the auction

announcement shall be made for 3 months prior to the auction)

5. Changes in the procedures for granting the Exploration WIUPK by priority and auction mechanism



The Concept of Offering and Auction for WIUPK


No. BUMN

(Interested)

BUMD

(Interested)

Action Explanation

1. Yes No Directly appoint to BUMN BUMN should establish a new Enterprise (Joint Venture) with condition is the

shares should given to BUMD at least 10%

2. No Yes Directly appoint to BUMD There are two ways to operate in the WIUPK:

a. BUMD may establish an Enterprise (Joint Venture) with condition is the

shareholder consists of BUMD and BUMS (maximum 49%); or

b. Operate itself

3.

Yes Yes Auction (If BUMN win) BUMN should establish a new Enterprise (Joint Venture) with condition the

shares should given to BUMD at least 10%

Yes Yes Auction (if BUMD win) There are two ways to operate in the WIUPK:

a. BUMD may establish an Enterprise (Joint Venture) with condition is the

shareholder consists of BUMD and BUMS (maximum 49%); or

b. Operate itself

4. No No Auction for Private Enterprise

(BUMS)

In the events that a BUMS is the winner of the auction, then it may operate in

the WIUPK with obligatory 10% participation by BUMD (4%by BUMD at

provincial level and 6% by BUMD at regency level)


The Concept of Offering and Auction for WIUP


No

.

WIUP Area BUMN

(Participant)

BUMD

(Participant)

BUMS

(Participant)

Cooperation

(Participants)

Individual (Maatschap,

Commanditaire

Vennootschap, or Firm)

(Participant)

Foreign Investment

Company

(Participant)

1. Less than or

equal to 500 Ha

No Yes Yes Yes Yes No

2. More than to 500

Ha

Yes Yes Yes Yes No Yes


C. Transitional Provision

a. The IUP OPK for processing and/or refining holder that already has the KTT and appointed by the Head of Mine

Inspector is still valid as person in charge of technical and environmental

b. The approval for the Partnership Program of the alluvial mineral which has been issued by the Minister is still valid

until the expiry and shall be adjusted to this MEMR

c. Registration Certificate (TR) is no longer required to conduct activities in non-core mining services business

d. Registration Certificate (TR) for transport and sale that has been issued before the effective date of this MEMR

Regulation shall adjusted to IUP OPK for Transportation and Sale within 6 months from the effective date of this

MEMR

e. Annual RKAB which has been submitted and/or approved, is still valid and shall be adjusted

f. The provisions concerning the Annual RKAB approval and the change of shares as well as BOD and/or BOC shall

be applied to COW and CCOW




g. The activity of the COW and CCOW shall be adjusted to be:

• Exploration activities, including general surveys, explorations and feasibility studies

• Production operation activities, including construction, mines, processing and/or refining, as well as

transportation and sale

• Activity adjustment of COW and CCOW shall be executed within 6 (six) months since the effective date of this

MEMR

h. Recommendation for ET-Tin is no longer required

i. Recommendation for ET-Coal is no longer required

j. Clean and Clear Status and/or Clean and Clear Certificate which has been issued is still valid




k. Non-metal mineral IUP or rock IUP which was issued prior to this MEMR does not require clean

and clear status and/or clean and clear certificate

l. The IUPs to be issued subsequent to this MEMR does not require clean and clear status



This Decree is regulated several matters related to the coal sale price for the electrical supply for the

public interest, which are:

a. The sale price is amount of USD 70 per metric ton of Free On Board (FOB) Vessel, which are

based on the reference specification on calories 6.322 kcal/kg GAR, Total Moisture 8%, Total

Sulphur 0.8%, and Ash 15%.

b. In the case of the coal specification is different from the specifications as stipulated in Point a and

Reference Coal Price is > USD 70/mt, it shall be calculated using the Coal Price formula as

governed in Appendix I of the Decree.

New Regulations2. MEMR Decree No. 1395 K/30/MEM/2018 as amended by MEMR Decree No. 1410K/30/MEM/2018


c. In the case of the coal specification is different from the specifications as stipulated in Point a and

the Reference Coal Price is < USD 70/mt, it shall be calculated using the Coal Price formula as

governed in Appendix II of the Decree.

d. Fulfillment of production royalty obligations by IUP OP, IUPK OP, and CCOW holders as stipulated

in Point a and b, shall be calculated with the following formula:

Production Royalty = (Production Royalty Rate Formula) x (Sales Volume) x (Sale Price).

e. Fulfillment of production royalty obligations by IUP OP, IUPK OP and CCOW as stipulated in Point

c, shall be calculated with the following formula:

Production Royalty = (Production Royalty Rate Formula) x (Sales Volume) x (Benchmark

Price of Coal).



f. IUP OP, IUPK OP, and CCOW holders which has fulfilled minimum percentage of coal sales for domestic needs

pursuant to the applicable MEMR Decree and comply to the provisions of Coal Sale Price as stipulated in Point a,

b or c, may be granted an increase in production at the maximum of 10% (ten percent) of the approved production

capacity.

g. This obligation has been effective since March 9, 2018 until December 31, 2019 with the maximum total sales

volume of coal at 100 (one hundred) million metric tons per year. The price that set forth in the agreement which is

made before the date of this MEMR Decree, is still valid and binding.

h. Minister of Energy and Mineral Resources Decree No. 0617 K/32/MEM/2011 is revoked.

The determination of the coal sale price in this decree applies only to the electrical supply for the public

interest and domestic needs, not for other purposes, such as export, mine mouth power plant1

1 MMPP shall refer to MEMR Regulation No. 24 Year 2016



This MEMR Decree regulates about Minimum Percentage Determination of Coal Sales for Domestic

Interests in 2018, as follows:

a. The minimum percentage of Domestic Market Obligation (DMO) is 25%

b. The IUP OP and CCoW holders shall comply to this minimum percentage, which is set at the

amount of 25% of the total production plan in 2018

c. Sanctions for the IUP OP and CCoW holders that do not fulfill this minimum percentage are as

follows:

• Reduction of production total in the next year of RKAB

• Reduction of export quota

New Regulations3. MEMR Decree No. 23K/30/MEM/2018


This Presidential Regulation No. 13 Year 2018 regulates about Beneficial Owner, as follows:

a. Every corporation is obliged to disclose its Beneficial Owner. This “Know the Beneficial Owner” principle shall

encompass identification and verification of the Beneficial Owner. The principle shall be implemented during

establishment of the corporation, registration, legalisation, approval submission, licensing submission and

throughout the operation of a corporation.

b. The subject of this Presidential Decree are legal entities or non-legal entities having an association of individuals

and/or organized assets (“Corporation”), including:

• limited liability companies;

• foundations;

• associations;

• cooperatives;

• partnerships (CV);

• firms; and

• other forms of corporations

New Regulations 4. Presidential Regulation No. 13 Year 2018


c. Beneficial Owner is defined as individuals who are:

• authorized to appoint or terminate the board of directors, board of commissioners, managers, facilitators, or

supervisors of a Corporation;

• capable to control a Corporation;

• entitled to directly or indirectly receive benefits from a Corporation;

• the true owner of the funds or shares of a Corporation; and

• considered to have satisfied the requirements as governed under the Presidential Regulation No. 13/2018

d. The Corporation is obliged to renew the Beneficial Owner Information periodically every 1 year.

e. Any Corporation who has completed or still in the process of Establishment/Obtainment of License, is obliged to

implement the Presidential Regulation No. 13/2018 and submit its Beneficial Owner Information no later than 1

year as of 5 March 2018.

New Regulations 4. Presidential Regulation No. 13 Year 2018


1. Revision to the Law No. 4 of 2009

2. Mining Policy

3. Government Regulation regarding deadrent and royalty

4. Various implementation guidance of MEMR Regulation No. 11 of 2018

Drafts and on going regulatory project

THANK YOU

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Phone : 021- 2911 0015 | e-mail: [email protected]

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REGULATORY UPDATE ON MINING