Extension of existing coWs and ccoWs GR24 provides that CoWs and CCoWs will be extended in the form of IUPs, and not by extensions to the CoWs or CCoWs themselves.
GR24 also provides details on the processing of CoW/CCoW extension requests.
MR 7 and MR 11 MR 7 imposes obligations on mining companies to carry out onshore processing and refining (either by themselves or in cooperation with another party) and bans the export of raw materials/ore by certain IUP holders from May 2012 (2 years ahead of the original schedule).
MR 7 also sets out the minimum levels of mineral processing and refining for specific metallic minerals, non-metallic minerals and rock commodities.
In mid May 2012, in addition to the series of regulations issued by the central government relating to the export of raw materials/ore (as discussed above), the government imposed an export duty of 20% on exports of certain raw materials/ore.
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The industry has been somewhat affected, since the regulations are perceived to be causing cost increases and delays in the industry. However, the recession in Europe, the economic slowdown in China, and the finite number of mining licences may also have had a detrimental impact on the industry.
M&a in the mining industry is rumoured to be at an all time high since the recession, is this true? If so what do you attribute this to?
MR 7 and MR 11 do not impose an export ban on coal, which we understand will be the subject of a separate ministerial regulation.
There are administrative penalties for failure to comply with MR 7, which range from temporary suspension of mining activities to revocation of the relevant IUP/IUPK.
Following widespread opposition and protests to the May 2012 deadline, the government modified MR 7 by issuing MR 11 which states that certain IUP holders can continue to export ore and raw materials as long as they meet certain requirements, including having a legitimate plan to meet domestic processing and refining obligations, a certificate as a registered exporter, and an export approval in respect of each shipment of raw materials/ore.
MR 7 and MR 11 have wide reaching implications, including the requirement for significant investment into the establishment of new and/or expansion of existing processing and refining facilities in Indonesia.
How has increasing scrutiny on the industry from the Government impacted it?
As part of the government’s efforts to protect the Indonesian mining industry and moreover prevent over-exploitation of Indonesia’s natural resources and excessive environmental damage, the government has issued various regulations, including GR24, MR 7, MR 11 and DGR 574.
Certainly M&A activity in the Indonesian coal sector is at an all time high. We attribute this to Indonesia having put in place strategies to improve the legal framework and transparency and maintaining a relatively stable democracy and currency. LM
Rahmat S. S. Soemadipradja SoEMadIPRadJa & taHER advocates
Wisma GKBI, Level 9 Jl. Jenderal Sudirman no.28 Jakarta 10210 - Indonesia tel: (62-21) 574 0088 Fax: (62-21) 574 0068