PREPARING A NEW ERA OF THE MINING LICENSE a brief legal update on the implementation of the tender system

Transcription

1 PREPARING A NEW ERA OF THE MINING LICENSE a brief legal update on the implementation of the tender system Presented by Eva Armila Djauhari for Mining in a Day, on 20 April 2017 Dharmawangsa Hotel, Jakarta, Indonesia

2 Agenda of discussion 1. Overview of current state of mining concessions in Indonesia 2. Regulatory references for tender process 3. Tender stages 4. Opportunities 5. Obstacles

3 1. Overview of current state of mining concessions in Indonesia Law No. 4 of 2009 concerning Mineral and Coal Mining ( Mining Law ) change the scheme of mining rights in Indonesia from previously granted in the form of contracts and concessions to mining business license (Izin Usaha Pertambangan or IUP). Contracts is honoured until its expiry, however shall be adjusted according to the provisions of the Mining Law. Concessions (Kuasa Pertambangan) shall be converted into IUP. Prior to the Mining Law, there have been 10,322 IUPs issued by the local governments throughout Indonesia. The central government initiated a Clear and Clean ( CnC ) verification program. Law No. 23 of 2014 concerning the Regional Government has changed the licensing landscape in Indonesia whereby Regents do not have anymore authority over mining licenses. The authority of the Regents have therefore been transferred to the Governors.

4 1. Overview (cont.) Under the Ministry of Energy and Mineral Resources ( MEMR ) Regulation No. 43 of 2015, there has been an evaluation on the transferred IUPs from the Regents to the Governor in the respective province. The evaluation has resulted in revocation of hundreds of IUPs that did not pass the administration, financial, technical and environmental evaluation. Status Mineral Coal Total IUPs Exploration Operation Production Exploration Operation Production CNC Non CNC Sub Total Total * *Data based on 2016 Report by the Directorate General of Mineral and Coal, MEMR

5 1. Overview (cont.) Directorate General of Mineral and Coal have issued up to batch XXIV of CnC status for qualified IUPs throughout Indonesia. Revocation of IUPs have also been started since batch XVIII (29 July 2016) until the recent batch XXIV (30 March 2017). Total number of the revoked IUPs are 2,119 and still counting. Batch Date Mineral Coal Total XVIII 29 July XIX 5 October XX 23 November XXI 30 December XXII 31 January XXIII 22 February XXIV 30 March Total 729 1,390 2,119

6 1. Overview (cont.) As soon as the verification and reconciliation of IUPs are completed by the government at both central and provincial levels, a tender process of the area of mining business license ( WIUP ) may be commenced. Tender process will be launched by a province depending on its preparation for WIUP and subject to the implementation regulation regarding the price that is currently being formulated. The price of data compensation and/or investment cost replacement are determined based on several criteria including the number of reserve and resources of mineral or coal and availability of facility and infrastructure.

7 2. Regulatory references for tender process The Mining Law. Government Regulation No. 23 of 2010 concerning Implementation of Mineral and Coal Mining Business, as amended. MEMR Regulation No. 28 of 2013 concerning the procedures for tender of area of mining business license and the area of the special mining business license for mineral and coal mining.

8 3. Tender stages Tender preparation Tender process (prequalification and qualification) Objection Formation of the tender committee Evaluation and announcement of the winning bidder Application of IUP exploration *MEMR Regulation No. 28/2013

9 3.a Tender preparation Tender shall be held by the Minister for WIUP covering two provinces or more than 12 mile of the shoreline for offshore mining. A governor is entitled to hold a tender for WIUP within its respective province or area less than 12 mile of the shoreline. Minister or governors shall publicly announce the proposed tender program in (i) 1 local and/or national newspaper and (ii) the MEMR or province office or website of such offices, at least 3 months prior to the opening of the tender program.

10 3.b Formation of the tender committee Tender committee for the tender held by the Minister shall consist of at least 7 members (odd numbers) who are competent in mining and are representatives of: Secretariat general of MEMR Directorate general of Mineral and Coal Geological agency Office of the provincial government Office of the regency government Tender committee for the tender held by the Governor shall consist of at least 5 members (odd numbers) who are competent in mining and are representatives of: Provincial government MEMR, at least 1 member Regency government office

11 3.c Prequalification Who can participate? The following parties may participate in a tender program: State owned companies (BUMN) Regional state owned companies (BUMD) Local business entities PMA companies* Cooperatives Individual*; (a) individual person; (b) limited partnership; (c) firm Individuals may only participate in a tender of up to 1,000 Ha PMA companies may only participate in a tender of 5,000 Ha and beyond. A company which mining business permit was revoked (a black listed company) shall not participate in the tender process.

12 3.c Prequalification Who is the qualified participant? Participants are deemed qualified when they satisfy the following requirements: Administrative the participant is in a good standing and completing the given forms Technical demonstrate (i) technical and mining management experience for at least 3 years (support from holding or affiliated company is permitted), (ii) mining experts and/or geologists who have 3 years experience at the minimum, (iii) working plan, consists of working plan and budget (RKAB) for 4 years of exploration and procurement of equipment and other facilities supporting the exploration. Financial submitting the audited financial statement (not applicable for a new company), place the performance bond for the amount of 10% of the data compensation price, undertaking to pay full price of data compensation at the latest 5 business days of the winning bidder announcement.

13 3.c Tender process 7 business days 3 months 30 days Prequalification (PQ) Announcement Distribution of PQ documents Submission of PQ documents PQ evaluation Clarification and confirmation of PQ documents Determination PQ result Re-PQ if < 2 participants 2 hours 5 business days 3 business days 7 business days Bid opening Bid price submission Tender briefing and/or site visit Distribution of bidding documents Invitation to participants who pass PQ Announcement of PQ result 5 business days 3 business days 5 business days Ranking determination Announcement of winning bidder Objection period Application of IUP exploration by the winning bidder *MEMR Regulation No. 28/2013

14 4. Opportunities New system of mining licenses provides ample and equal opportunity for business entities interested in acquiring a new mining license, given the process will be more transparent and objective. The mining license will be issued in a more appropriate manner and cleaner, therefore increasing business and legal certainty for the holder as well as reducing certain investment risks. Since coordination with other departments will be established prior to the tender process, the risk of cross department issues during the operation might be reduced.

15 5. Obstacles Although it is indicated to come to an end, reconciliation and verification program is yet to be closed. The regulation regarding the price of data compensation is not ready. Readiness, skills and competence of the relevant government officials of the tender process are unknown. Regulation and policy changes may impede the implementation of this new system.

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