The GOI enacted a new Mining Law on January 12, 2009. Under the Law No 4/2009, a company will be given a permit instead of the previous Contract of Work. A mining concession will be given for 20 years, which can be extended another 10 years with a maximum of two extensions. The concession areas will be limited for metal (5,000 hectares up to 100,000 hectares), non metal (500 hectares up to 25,000 hectares), and specialty non-metal five hectares up to 5,000 hectares. The law also stipulated that a mining company will have to pay additional 10% of net profits to the local and central governments. The law also prohibits mining companies from exporting unprocessed ore, and states that mining companies must refine the mined product in Indonesia starting five years after the enactment of the new law (2014).
Indonesia’s coal production increased slightly from 217 million tons in 2007 to 225 million in 2008. The production of nickel and iron ore also increased: nickel ore from 6,623 thousand tons to 14,986 thousand tons, and iron ore from 1,984 thousand tons to 4,609 thousand tons. However, other mineral production fell compared with 2007’s production. Copper’s production decreased from 797,400 tons in 2007 to 580,950 tons in 2008. Lower output was also recorded for gold from 117.73 tons to 57.94 tons; silver from 269.38 tons to 209.06 tons; bauxite from 15,406 thousand tons to 14,986 thousand tons; and tin from 91.28 thousand tons to 79.21 thousand tons.
In 2007, investment in the mining industry reached $1.253 billion, down from the 2006 figure of $1.456 billion. In 2008, investment increased slightly to $1.654 billion. The government estimates that investment in 2009 will decrease to $1.38 billion because mining companies will wait for the implementation regulations of the new Mining Law.
The value of imported mining equipment was $628 million in 2006, and it increased to $718 million in 2007. U.S. suppliers held 28% of the total market share. Sixty to eighty percent of the equipment used by mining companies was imported. Other major suppliers for mining equipment are Japan, Korea, China, Germany, Australia, Italy, and Sweden. Industry experts predict that the market will remain at the current level for the next two years.
American suppliers are particularly strong in the following areas: front end shovel loaders; pile-drivers and pile-extractors; coal or rock cutters and tunneling machinery; other continuous-action elevators; bulldozers; other bulldozers and angle dozers; self- propelled boring or sinking machinery; buckets, shovels, grabs and gribs; other buckets, shovels, grabs and gribs; parts of boring and sinking machinery; and crushing and grinding machines for stones.
Despite the current economic situation, several mining companies will continue to implement part of their investment plans in 2009. Under the new law, mining companies should refine their ore in Indonesia before they can export. In order to comply with the new regulation, at least 10 mining companies plan to build smelting plants in Indonesia. PT Nusantara Smelting will build a nickel smelting plant in Bontang, East Kalimantan with a total investment of $1.04 billion. PT Smelting Gresik will build a $1.4 billion copper refinery plant in Gresik, East Java. PT Aneka Tambang, the state-owned mining company, will build three aluminum smelting plants in West Kalimatan ($250 million), in Bintan ($500 million) and in South Kalimantan ($60 million). Each of these provide opportunities for American service and product suppliers.