New Divestment Procedures for Foreign Mining Companies

The Ministry of Energy and Mineral Resources(“Ministry”)recently issued Regulation No. 9 of 2017 on Procedures for Divestment and Mechanisms for the Determination of Divested Share Prices for Minerals and Coal-Mining Business Activity(“Regulation 9/2017”).In essence, Regulation 9/2017 is an implementation of Article 99 of Government Regulation No. 23 of 2010 on the Implementation of Business Activities Within the Minerals and Coal Sector [1] (“Regulation 23/2010”),which required further guidelines to be set out for foreign mining companies as regards the divestment of their shares, as well as the price determination for any such divested shares.Prior to the issuance of Regulation 9/2017, these same matters were regulated under Ministerial Regulation No. 27 of 2013 on Procedures for Divestment, Share Pricing and Changes to Investment for Minerals and Coal-Mining Businesses(“Regulation 27/2013”). [2] Divestment ObligationIn line with Regulation 23/2010, Regulation 9/2017 requires foreign companies which are holding Production Operation Mining Business Permits (Izin Usaha Pertambangan Operasi Produksi–“IUP OP”) or Special Production Operation Mining Business Permits (Izin Usaha Pertambangan KhususOperasi Produksi–“IUPK OP”)to gradually divest at least 51% of their total shares to Indonesian parties within five years of the fifth year since the commencement of the production operation stage oftheir first mining activities. [3] The minimum percentages of shares that must be divested each year are as detailed in the table below: [4]