Call Center: +62 21 30012490

Government to Sign Revised Mining Contracts This Month

The Energy and Mineral Resources Ministry will this month sign amended contracts of work with nine coal mining companies after it recently finished renegotiations with the miners.

The ministry’s director general for minerals and coal, Bambang Gatot Ariyono, said on Thursday that the formulation of financial obligations was signed by the Finance Ministry’s Fiscal Policy Office, the Energy and Mineral Resources Ministry and nine coal companies holding contracts of work.

“The signing means that the nine companies have agreed to the formulation of the coal mining contract. Therefore, we plan to sign the amendments to their contracts of work probably after Lebaran,” Bambang said.

The renegotiation of contracts of work has been lengthy, particularly because of contentious issues related to financial obligations. Among terms regulated in the financial obligation formulation are requirements that coal mining companies pay royalties in advance and that an export tax may be imposed in the future. The two issues contributed to a standoff in the re-negotiations with coal mining firms, which saw the requirements as disadvantage to them.

“The nine companies hold the second generation of coal contracts of work that abide by the prevailing regulation. It means that whatever regulation applies, they have to follow,” Bambang said, referring to the nine companies’ willingness to adopt the new requirements.

The nine companies are Indominco Mandiri, Antang Gunung Meratus, Bahari Cakrawala Sebuku, Borneo Indo Bara, Gunung Bayan Pratama Coal, Jorong Barutama Greston, Kartika Selabumi Mining, Mandiri Inti Pratama and Trubaindo Coal Mining.

The re-negotiation was part of the government’s move to renegotiate numerous contracts of work held by mineral and coal companies following the implementation of the 2009 Mining Law. 

The renegotiations aim to adjust several points in the contracts of work to provide greater benefits to the government from mining activities throughout the period of the contracts before they shift to mining permits.

The 2009 Mining Law aims to change the mining regime from “contract” to “permit”, which will give the state a superior position.

Renegotiations should have been completed one year after the law was passed. However, the target was frequently extended and has been missed because of the complexity of related issues.

Six main issues are on the table for renegotiation, namely adjustments to royalties, mining concession size, obligations for downstream activities, continuance of operation after contract expiry, divestment and the use of local goods and services.

Seventy-three coal contracts of work and 34 mineral contracts of work are to be renegotiated. Out of the total, only one contract has been amended and signed, which is the contract of work of nickel miner PT Vale Indonesia.

Energy and Mineral Resources Minister Sudirman Said said the ministry was committed to completing renegotiations with other coal mining firms.