New Regulation Clarifies Rules on Related Party Mining Services Companies

The Indonesian Director General of Mineral, Coal and Geothermal ("Director General") issued Regulation No. 376.K ("Regulation 376.K"), which clarified the restrictions on the use of related party mining services companies under Law no. 4 of 2009 (the "2009 Mining Law"). Regulation 376.K opens up the possibility of up to five Izin Usaha Pertambangan (IUP) or Izin Usaha Pertambangan Khusus (IUPK) concession holders using a related party mining services company, which will enable a certain degree of risk and cost sharing between investments.

Prior to the enactment of the 2009 Mining Law, related party mining services companies had been commonly used for two purposes. The first is to enable a foreign party to exercise a degree of operational control over domestic companies holding kuasa pertambangan (KP) concessions under the previous law. The second purpose is to facilitate a degree of risk and cost sharing between mining concessions.