UPDATE ON CURRENT REGULATORY AND

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UPDATE ON CURRENT REGULATORY AND ITS
IMPLEMENTATION
DIRECTOR GENERAL OF MINERAL AND COAL THAMRIN
SIHITE
INTERNATIONAL MINING CONFERENCE
EXHIBITION OCTOBER 10TH, 2012
DIRECTORATE GENERAL OF MINERAL AND COAL MINISTRY
OF ENERGY AND MINERAL RESOURCES
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MAIN TOPIC

• INTRODUCTION 3
• CURRENT CONDITION 11
• STRATEGIC ISSUES 23
• INVESTMENT OPPORTUNITIES 32
• CLOSING REMARKS 35

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INTRODUCTION
I.
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I. INTRODUCTION

• 1. Background
• Essence of Article 33 of Indonesia Constitution
  Year 1945 is earth, water, and mineral
  resources, including mineral and coal, are non
  renewable and finite resources which have
  important role in people life. Thus, country has
  to manage and use them for Indonesia people
  welfare. The meaning of this article is mineral
  and coal mining shall trigger a better life and
  give benefit to people of Indonesia.
• Indonesia law mining is involved by Law No. 32
  Year 2004 regarding Region Autonomy. It affects
  authority distribution of issuing Mining Permit
  (IUP) between Minister, Governor, and Regent. It
  means that Local Government can enact Mining
  Permit (IUP).
• Law No. 4 Year 2009 was enacted at January 12,
  2009 and new era of mining industry in Indonesia
  had been begun. It is very different from
  previous Law . It contents domestic market
  obligation, added value of mineral and coal
  domestically, controlling and supervising local
  government , etc.
• One of negative effect of the new era of mining
  and implementation of autonomy is IUP was issued
  by local government increased immensely and
  uncontrolled.

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I.2.INDONESIAN VISION
I. INTRODUCTION (continued)
RPJM 4
2016-2024
RPJM 3
2015-2019
RPJM 2
2010-2014
RPJM 1
2005-2009
2025 PDB USD 4,0 4,5 triliun Pendapatan/Kapita
Diperkirakan USD 14.250 15.500 (negara
berpendapatan tinggi)
2010 PDB USD 700 Miliar Pendapatan/Kapita USD
3.000
Law No.17/2007 RPJPN 2005-2025
To create the Independent and Prosperous Indonesia
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I. 3. Role of Mineral and Coal Sub-sector
I. INTRODUCTION (continued)
Energy and Mineral Resources for Prosperous
Indonesia
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I.4. Mining Sub-Sector Development In Each
Corridor of MP3EI
I. INTRODUCTION (continued)
DEVELOPMENT CENTRE OF COAL AND IRON ORE PROCESSING
DEVELOPMENT CENTRE OF COAL AND GOLD MINERALS
DEVELOPMENT CENTRE OF NICKEL MINERALS
DEVELOPMENT CENTRE OF GOLD AND COPPER MINERALS
DEVELOPMENT CENTRE OF MANGAN
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I. INTRODUCTION (continued)
I. 5. Four Tracks Strategy
PRO POOR CORPORATE SOCIAL RESPONSIBILITY
MINERAL AND COAL RESOURCES FOR PEOPLE WELFARE

• PRO GROWTH
• STATE REVENUE
• INVESTMENT
• BENIFICIATION
• TRADING BALANCE

• PRO JOB
• EMPLOYMENT
• LOCAL CONTENT

• PRO ENVIRONTMENT
• RECLAMATION AND POST MINING
• GOOD MINING PRACTICE

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I. INTRODUCTION (continued)
I. 6. Structure of Indonesias Mineral and Coal
Mining Law
Minister of Energy and Mineral Resources
Regulation
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I. INTRODUCTION (continued)
I.7. Policy Direction
Implement priority fulfillment of coal for
domestic needs
Provide certainty and transparency (Mining Law
regulation supporting, sanction violations of the
provisions, etc.)
Improving supervision on good mining practice
POLICY DIRECTION
Increasing investment and state revenues from
mining
Encourage the development of value-added products
(i.e. processing, local content, local
expenditure, upgrading brown coal, labor and CSR)
Maintain environmental sustainability through
environmental management and monitoring,
including the reclamation and post-mining)
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CURRENT CONDITION
II.
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II. CURRENT CONDITION
II.1 Mineral Potency
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II. CURRENT CONDITION (continued)
II.2 Coal Potency
Including 41 billion tons U/G
Source Geological Agency, 2011
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II. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.1 MINING INVESTMENT 2004-2014
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II. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.2. Non Tax State Revenue in Energy and
Minerals Sector
Trillion Rupiah
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II. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.3 Non Tax State Revenue of Sub-Sector
Minerals and Coal
Triliun Rupiah
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II. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.4. Non Tax State Revenue of Mineral (IUP
and Kontrak Karya)
Triliun Rupiah
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II. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.5. Non Tax State Revenue og IUP Mineral
Miliar Rupiah
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II. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.6. Nickel Ore Processing Strategy
Current Condition (based on data from Ministry of
Trade and Ministry of Energy and Mineral
Resources)
Rare earth minerals Scandium, Lantanum, Yttrium
Added value from ore into metal is 19 X
State revenue that hasnt been paid is USD 6,2
million or IDR 56 billion
For last 3 years, nickel ore export increases for
800

• Policy strategy
• Synchronization with the laws and regulations.
• Apply DMO regulation to fulfill local demand of
  nickel/stainless steel industry.

• Problems
• There are big big numbers of nickel ore export in
  2011 (33 million tonnes), that increases for 800
  compared to year of 2009 when Law No 4 Year 2009
  released. This condition doesnt encourage local
  Nickel/Stainless Steel industry.

• Economic Impact
• Encourage local nickel processing industry with
  demand of nickel ore 18 million tonnes/year.

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III. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.7. Iron Ore/Iron Sand Processing Strategy
Rare Earth Minerals Vanadium, Titanium
Added value from ore to metal is 4 X
Current Condition (based on data from Ministry of
Trade and Ministry of Energy and Mineral
Resources)
State revenue that hasnt been paid is USD 2,6
million or IDR 23 billion
For the last 3 years, iron ore and iron sand
export increases for 700

• Policy strategy
• Synchronization with the laws and regulations.
• Apply DMO regulation to fulfill local demand of
  steel industry.

Problems There are big big numbers of iron ore
and iron sand export in 2011 (13 million tonnes),
that increases for 800 compared to year of 2009
when Law No 4 Year 2009 released. This condition
makes iron ore/iron sand reserves will run out in
next 9 years. This condition doesnt encourage
local steel industry.
Economic Impact Encourage local iron ore/iron
sand processing industry (sponge/pig iron) that
has capacity for 9,5 million tonnes/year, with
estimation of investment is about USD 1 billion.
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III. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.8. Copper Ore Processing Strategy
Rare earth minerals Platina, Paladium,
Selenium, Telurium
Current Condition (based on data from Ministry of
Trade and Ministry of Energy and Mineral
Resources)
State revenue that hasnt been paid is USD 0,2
million or IDR 2 billion
For the last 3 years, copper ore export increases
for 1.100

• Policy Strategy
• Synchronization with the laws and regulations.

• Problems
• There are big big numbers of copper ore export in
  2011 (14 thousand tonnes), that increases for
  800 compared to year of 2009 when Law No 4 Year
  2009 released.
• Capacity of local processing and refining
  industry (copper cathode) only absorbs about 30
  of total concentrate production.
• 0,01 concentrate that has precious metals has
  been processed outside the country.

• Economic Impact
• Encourage local processing and refining industry
  that process copper concentrate into copper
  cathode with capacity 425 thousand tonnes/year
  with estimated investment about USD 1,4 billion.
• Increase competitiveness of copper downstream
  industry that produce wires, PCB, and another
  electronic components.

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III. CURRENT CONDITION (continued)
II.3. Background of MEMR Regulation no.7/2012
II.3.9. Bauxite Ore Processing Strategy
Rare earth minerals Titanium, Tantalum,
Scandium, Lantanum, Yttrium)
Current Condition (based on data from Ministry of
Trade and Ministry of Energy and Mineral
Resources)
Added value from ore to metal is 30 X
For the last 3 years, bauxite ore export
increases for 500
State revenue that hasnt been paid is USD 6,2
million or IDR 56 billion

• Policy strategy
• Synchronization with the laws and regulations.
• Apply DMO regulation to fulfill local demand of
  Alumina industry.

• Problems
• There are big big numbers of bauxite ore export
  in 2011 (40 million tonnes) that increases for
  500 compared to year of 2009 when Law No 4 Year
  2009 released. This condition makes bauxite
  reserves will run out in only 4 years and this
  will not encourage local alumina industry.

• Economic impact
• Encourage local processing and refining industry
  that process bauxite ore into Alumina with
  capacity 7 million tonnes/year, with estimated
  investment about USD 8,4 billion
• Demand of Alumina from PT. INALUM in about 500
  thousand tonnes/year can be supplied locally.

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STRATEGIC ISSUES
III.
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III. STRATEGIC ISSUES
III.1 IUP Reconciliation
III.1.1 Legal Basis of IUP Reconciliation
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III. STRATEGIC ISSUES
III.1 IUP Reconciliation
III.1.2 IUP Reconciliation Status (September
17th, 2012)

• Rekapitulasi IUP per 17 September 2012

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III. STRATEGIC ISSUES
III.1 IUP Reconciliation
III.1.3 Requirement for IUP Clear and Clean Status

• 1. Administration
• No overlapping area to another IUP and Contract
  of Work (CoW)/ Coal Contract of Work (CCoW) area.
• IUP is valid and according to right procedures.
• 2. Technical
• Exploration Report
• Feasibility Study Report
• Approval of Environment Document
• 3. Paying Financial Obligation
• Landrent
• Royalty

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III. STRATEGIC ISSUES
III.2 Mineral Added Value
III.2.1 Time Flow of Mineral Added Value
MR No. 11/2012 May 16, 2012
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III. STRATEGIC ISSUES
III.2 Mineral Added Value
III.2.2 Priciples of Mineral Added Value Policy
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III. STRATEGIC ISSUES
III.2 Mineral Added Value
III.2.3 Objectives of Controling Production
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III. STRATEGIC ISSUES
III.2 Mineral Added Value
III.2.4 Implementation of Mineral Value Added
(Minister Regulation No 7/2012)
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IV. STRATEGIC ISSUES
III.3 Good Mining Practice
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INVESTMENT OPPORTUNITIES
IV.
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IV. INVESTMENT OPPORTUNITIES

• IV. 1 Investment Opportunities in Mineral and
  Coal Mining Subsector
• Mining infrastructure developments (mainly in
  Borneo and Sumatra).
• New application of mining through bidding process
  in new areas of mining
• Added Value of Mineral (to development of
  processing and refining)
• Cooperation in underground coal mining
  development
• Utilization of law rank coal (LRC), for example
  Coal liquafaction, Coal gasification, Mine-mouth
  power plant
• Mining in Indonesia closed to regional
  development, especially remote-area development.
  Mining is part of Master Plan of Acceleration and
  Extention of Indonesia Economic Development which
  is divided in to six development corridors named
  as Sumatera, Java, Bali-Nusa Tenggara,
  Kalimantan, Sulawesi, Papua-Maluku.

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IV. INVESTMENT OPPORTUNITIES
IV.2 Master Plan of Acceleration and Extention of
Indonesia Economic Development
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CLOSING REMARKS
V.
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V. CLOSING REMARKS

• Indonesia has mineral and coal resources and
  reserves that still prospective to be exploited
  in the future both in the upstream and mainly to
  the downstream industry as well.
• Obligation to increase added value domestically
  and supporting regulations provide opportunity
  for establihsment of mineral processing and
  refining plant in Indonesia.
• Indonesia still needs big investment to develop
  the potency on mineral and coal and encourages
  all private investment, especially for mineral
  and coal processing and refinery.

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THANK YOU
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