The GOI enacted a new Mining Law on January 12, 2009. This law is expected to provide greater certainty for investment in the industry. Under Law No. 4/2009, a company will be given a mining business license (IUP) instead of the previous Contract of Work. All new mining licenses will be granted through a tender. Although the tender process will slow down the process for developing new mining projects, it will ensure that brokers are not allowed to qualify for a mining license. Unlike the previous mining law, the new law allows foreign investors to hold up to 100% of the shares of an Indonesian mining company. However, under Government Regulation No. 23/2010, the foreign shareholders of an IUP must divest 20% of their shares after five years of production. The central government and local governments have the first priority to purchase these shares. The maximum area for a mining permit has been increased significantly. For coal mining exploration, the maximum allowable area is 50,000 ha, and 15,000 ha for coal mining production. For mineral mining the maximum allowable area for exploration is 100.000 ha and 25.000 ha for production. A mining concession will be given for 20 years, which can be extended by another 10 years, with a maximum of two extensions. The law also prohibits mining companies from exporting unprocessed ore, and states that mining companies must refine the mined product in Indonesia starting five years after the enactment of the new law (2014).
In 2010, the mineral and coal industry is still expanding as the demand for mining products like coal, tin, nickel, copper, iron ore and aluminum also increase with the improvement of the global economy. The price increase on several mineral commodities in the world market has made many mining companies to increase their production capacities. The table below shows that most mineral production for 2010 was higher than 2008 production levels.
In 2009, investment in the mining industry reached $1.81 billion, an increased from the 2008 figure of $1.654 billion. In 2010, investment increased drastically to $3.186 billion. The government estimates that investment in 2011 will increase to $3.5 billion, supported by greater certainty after the GOI issued new mining regulations. The government had issued several regulations attached to the new mining and coal law in 2010. The implementation regulations, covering mining areas, coal and mineral businesses, mining supervision, reclamation and post mining issues, are expected to provide legal certainty and increase investors’ confidence in developing their mining projects.
There are significant opportunities for the supply of various mining equipment and services to be utilized in various stages of mining operations including but not limited to:
- Drilling equipment and parts,
- Trucks, moving and hauling equipment, excavators, front end loaders,
- Milling and processing equipment such as conveyors, sub mills, cyclones, crushers,
- Consumables such as pumps, chemicals and reagents, filtration equipment, explosives,
- Mine safety equipment,
- Replacement parts, and,
- Ancillary services such as equipment repair and maintenance, and mine rehabilitation.
Several mining companies will continue to implement part of their investment plans in 2011. Under the new law, mining companies must refine their ore in Indonesia before they can export. In order to comply with the new regulation, at least 10 mining companies plan to build smelting plants in Indonesia. PT Nusantara Smelting will build a nickel smelting plant in Bontang, East Kalimantan with a total investment of $1.04
billion. PT Smelting Gresik will build a $1.4 billion copper refinery plant in Gresik, East Java. PT Aneka Tambang, the state-owned mining company, will build three aluminum smelting plants in West Kalimantan ($250 million), in Bintan ($500 million) and in South Kalimantan ($60 million). Each of these provides opportunities for American service and product suppliers.