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Mining Area

Background
As explained in Article 1 (30) of Law No. 4 of 2009 on Mineral and Coal Mining (“Mining Law”), Mining Area means a part of Mining Zone which has already been completed with available data, unlocked potentials and/or geological information. Mining Zone means a zone with potential mineral and/or coal reserves, unbound by the limits of government administration as part of the national zoning plan (tata ruang nasional).

It is within the central government’s rights, in the pursuit of public interests, to determine Mining Zone. Article 14 of Mining Law stipulates that a determination of Mining Area is conducted upon the coordination between central and regional governments, on the basis of both parties’ data, and shall be delivered in writing to the House of Representatives. Some of the central government’s authorities may be delegated to provincial governments. Both levels of government must continuously carry out mining surveys, exploration, and research and make inventories in preparation of Mining Zone.

Determination of Mining Area
Article 16 of Mining Law states that one Mining Area shall consist of 1 (one) or some Mining Permit Area, of which the locations overlap the boundaries of provinces and/or districts//cities.

There are some criteria, which the government may apply in determining one or more Mining Permit Area:

a.         Geographical location;

b.         Principles of Conservation;

c.         Carrying capacity of Environmental conservation;

d.         Optimization of mineral and/or coal resources; and

e.         The density of locals living nearby the area.

Procedures in Obtaining Mining Permit Area
Article 8 (3) Government Regulation Number 23 of 2010 on the Implementation of Mineral and Coal Mining Business Activities (“GR 23/2010”), Mining Permit Area is obtained through a tender process. Each applicant; which may be an individual, business entity, or cooperation, may only be entitled to 1 (one) Mining Permit Area. However, if the applicant is a public-owned entity, it may be entitled to more than one Mining Permit Area. The Minister, governor, or regent/mayor shall announce transparently the tender at least 3 (three) months before it is carried out.

Article 13 of GR 23/2010 regulates the requirements that an applicant must comply to qualify as a bidder. There are the administrative, technical and financial requirements.

The administrative requirements include:

  1. Filling of a special form prepared by the tender committee;
  2. Submission of a company profile, deed of establishment and
  3. Tax number.

The technical requirements include:

  1. Submission of a statement that the applicant is experienced in the field of mining or has ever carried out business in this field for 3 years or more. If the applicant were newly established, it would need a recommendation by its holding or parent company, business partner or its affiliates engaged in the mining field;
  2. Having at least 1 (one) expert in mining and/or a geologist with a working experience on the related field for 3 (three) years or more;
  3. Submission of an annual working plan and budget for a 4-year exploration.

On the financial requirements, an applicant is required to:

a.         Submit a financial statement of previous year of its business activities, which has been audited by a public accountant;

b.         Deposit 10% (ten percent) of the cost of the compensation for data gathered by the government for the bidding in a government-assigned bank, to ensure participation in the process; and

c.         Make a statement of commitment to pay for the bid value of Mining Permit Area not more than 5 (five) business days after the winner of the bidding process is announced.

Johan Kurnia

Mining Area
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