C H I N E S E I N V E S T M E N T I N T H EI N D O N E S I A N M I N I N G I N D U S T R Y
Michael S. [email protected]
HISTORICAL INDONESIAN NICKEL PRODUCTION
Sources: Indonesian Coal Mining Association, U.S. Geological Survey, Indonesian Directorate General of Mineral andCoal 2018 Performance Report (Laporan Kinerja Direktrorat Jendral Mineral dan Batubara tahun 2018), PwC Analysis
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Indonesia Nickel Mining Resources and Reserves
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PT Tsingshan Steel Indonesia (“Tsingshan Indonesia”) is part of
Tsingshan Holding Group (“Tsingshan”), based in Wenzhou, China.
▪ 2017: Tsingshan invests $2.8 billion to build a high-capacity
ferronickel smelter plant in Indonesia with annual production
capacity of 2 million tons of stainless steel.
▪ 2019: Tsinghan works with PT Vale Indonesia Tbk to build a $700
million battery-grade nickel plant in Indonesia with annual nickel
production capacity of 50,000 tons. The project is expected to be
completed in 16-18 months.
TSINGSHAN SMELTER
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Zhejiang Huayou Cobalt Co., Ltd. (“Huayou”) manufactures, processes
and sells lithium-ion new energy materials and cobalt new materials. It
also engages in the mining, selection and metallurgy of non-ferrous
metals.
▪ 2019: Huayou cooperates with PT Aneka Tambang Tbk (“Antam”)
and Shandong Xinhai to develop nickel projects that will require an
investment of about $6 billion to $12 billion.
HUAYOU COBALT SMELTERS
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Company Sponsor Location ProductInput Capacity
(in Tons)
Output Capacity
(in Tons)
1. PT Vale Indonesia China
Tsingshan Holding Group
Bahodopi, Central Sulawesi and
Pomalaa, Southeast Sulawesi
Matte (NPI) 8.000,000 80,000
2. PT Aneka Tambang Tbk China
Zhejiang Huayou Cobalt
and Shandong Xinhai
West Kalimantan Ferronickel 2,716,948 135,000
3 PT Indoferro
China National Machinery
Import
Cilegon, Banten NPI 800,000 25,000
4 PT Wanxiang Nickel Indonesia China
Wanxiang
Morowali, Central Sulawesi Ferronickel & NPI 8,900,000 900,000
5. PT Bintang Smelter Indonesia Fujian Pan-Chinese Mining
Co. Ltd.
Konawe, Southeast Sulawesi NPI 992,000 80,000
6. PT Virtue Dragon Industry Jiangsu Delong Nickel Ind.
Co., Ltd.
Konawe, Southeast Sulawesi Ferronickel 4,560,000 600,000
7. PT Huadi Nickel-Alloy Indonesia China
Huadi Nickel-Alloy
Bataeng, South Sulawesi NPI 530,000 5,300
8. PT Sulawesi Mining Investment Tsingshan Holding Group Morowali, Central Sulawesi NPI 1,600,000 300,000
This list is not exhaustive. A more extensive list is available at https://akcdn.detik.net.id/community/media/visual/2019/08/22/58f091c7-365d-4136-a4f1-54273b8e138a.png?a=1 S S E K I N D O N E S I A N L E G A L C O N S U LTA N T S | 7
LIST OF NICKEL SMELTERS IN INDONESIA*
2 0 0 9Indonesian Mining Law puts a total export ban on nickel ore andall other raw materials, set to take effect in early 2014
Ea r l y 2 0 1 4
Government reschedules smelting policy – raw nickel exports are
re-permitted
Ea r l y 2 0 1 7Smelting policy is tightened to force nickel miners to build
smelters; total export ban now set for January 2022
E n d o f 2 0 1 8Indonesia no longer dominant player in nickel exports as
Philippines takes its place.
A u g u st 2 0 1 9
Indonesia issues Minister of Energy and Mineral Resources
(MEMR) Regulation No. 11 of 2019 to expand on MEMR 25/2018
and announces total nickel export ban to take effect in early 2020.
Companies are to settle remaining contracts.
J a n u a r y 1 , 2 0 2 0
Total ban on raw nickels exportS S E K I N D O N E S I A N L E G A L C O N S U LTA N T S | 8
INDONESIAN NICKEL EXPORT BAN
FOREIGN SHAREHOLDING LIMITATION AND DIVESTMENT REQUIREMENT
❑ Divestment -> Requirement to sell shares to Indonesian parties, which include:
▪ Central Government;
▪ Regional Governments;
▪ State-Owned Enterprises;
▪ Regional-Owned Enterprises; and
▪ Indonesian private business entities (in the form of limited liability company).
❑ Divesting party cannot provide loan to the Indonesian parties to purchase the divested shares
❑ Prohibition on pledging shares that must be divested
❑ Stipulation of the price of divested shares: fair market value and without consideration of the mineral
reserves at the time of divestment
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FOREIGN SHAREHOLDING LIMITATION AND DIVESTMENT REQUIREMENT
❑ Smelter Companies
▪ 100% open for foreign ownership
▪ No share divestment requirement
❑ Mining Companies (IUP and IUPK holders)
▪ 100% open for foreign ownership if establishing a new company to bid for a mining license
▪ Divestment requirement after 5 years of commercial production
▪ Divestment requirement is gradual from 6th through 10th year after commercial production
▪ Divestment procedures and the stipulation of the price of the divested shares are set out in MEMR
Regulation No. 9 of 2017 regarding Procedures for Divestment and Mechanisms for the
Determination of the Price of Divested Shares for Mineral and Coal Mining Businesses, as amended
by MEMR Regulation No. 43 of 2018 (MEMR Reg 9)
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FOREIGN SHAREHOLDING LIMITATION AND DIVESTMENT REQUIREMENT
❑ Acquiring Existing Mining Company
▪ 75% -> maximum foreign ownership if acquiring an existing mining company in the exploration stage
▪ 49% -> maximum foreign ownership if acquiring an existing mining company in the operation
production stage
Note: Foreign ownership includes both foreign companies and Indonesian companies with direct or
indirect foreign shareholders
Year after commercial
productionDivested shares
6th 20%
7th 30%
8th 37%
9th 44%
10th 51%
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FOREIGN SHAREHOLDING LIMITATION AND DIVESTMENT REQUIREMENT
Gradual divestment from the 6th through 10th year after commercial production for mining companies
(IUP or IUPK holders) with foreign ownership:
▪ A smelter may be licensed by the Ministry of Industry (MOI) or the Ministry of Energy and Mineral
Resources (MEMR)
▪ The principal differences are as follows:
Difference Smelter licensed by MOI Smelter licensed by MEMR
Location
Must be located in an industrial estate or an area zoned for
industrial activities, unless due to its raw materials and/or
production process a special location is required (i.e., if the
smelter is to be located near the mining area)
Must be located in an area zoned for mining
activities
Reporting obligation
Only periodic reports (LKPM) to the Investment
Coordinating Board (BKPM)
Besides LKPM, there are additional reporting
obligations to the MEMR:
• Annual work plan and budget
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SMELTER LICENSES (MOI vs. MEMR)
SMELTER LICENSES (MOI vs. MEMR)Difference Smelter licensed by MOI Smelter licensed by MEMR
• Monthly, quarterly and annual reports
• Term sheet/MOU for any mineral sale agreement
Term As long as the smelter company continues
in business
30 years and can be extended, each for a maximum 20 years
Transfer of shares Does not require recommendation from
the MOI
Requires recommendation from the MEMR
Application procedures Additional requirements:
• MOU or cooperation agreement with ore supplier
• Experts in mining or metallurgy having at least 3 years of experience
• MOU with the refined products purchaser
• Feasibility study approved by the MEMR or relevant Governor
• Corporate documents and mining license of ore supplier
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Michael S. [email protected]
SSEK INDONESIAN LEGAL CONSULTANTSMayapada Tower I, 14th Floor Jl. Jend. Sudirman Kav 28, Jakarta, 12920, Indonesiawww.ssek.com