EV Growth Opens Opportunities in the Mining Industry

The Steady Growth of the Mining Industry

Indonesia’s mining industry has excellent potential, especially since the prices of mined mineral commodities have increased. This view is echoed by the Chief Director of the Institute for Development of Economics and Finance, Eko Listiyanto.

The Central Statistics Agency (Badan Pusat Statistik) noted that the mining industry had recorded a positive growth of 4% throughout 2021. Furthermore, it was recorded that Indonesia’s economy grew by 3.69% in 2021.

In addition to Indonesia’s expanding economy, Eko points out that several sectors, such as agriculture, health services, information communication, and real estate, will continue to support this economic growth.

These sectors continue to increase Indonesia’s Gross Domestic Product (GDP), which remained positive in the midst of the pandemic. These sectors are resilient but still need to be further developed but need to be further disaggregated.

The Downstream Industry Development

Nickel as a New Valuable Product

Bahlil Lahadalia, a prominent figure in the Ministry of Investment, confirmed that Indonesia should start focusing on transforming commodities into ready-to-use products, starting with nickel. He goes on to say that Indonesia has the world’s largest nickel reserves, which could reach up to 21 million tons.

Nickel’s Role in the EV Industry

By downstreaming crude nickel into products such as EV batteries, the mineral has enormous potential to add value to the commodities and boost the Indonesian economy. Prominent players in the market have already started their contributions. An example is a partnership between Indonesia’s State-Owned Enterprises (BUMN) and LG, worth USD 9.8 billion.

Huayou Cobalt is a company interested in building a smelter for batteries in Indonesia. They plan to invest up to IDR 30 trillion. Other companies are showing interest in building a nickel and cobalt smelter in Indonesia worth approximately IDR 30 trillion.

Huayou Cobalt is planning to partner up with an EV battery manufacturer from China named EVE Energy. The joint venture will be registered under the name PT Huayou Nickel Cobalt, where Huayou will have a 20% stake while EVE will hold a 17% stake.

The other stakeholders involved in this venture are Yongrui Holdings which holds 31%, Glaucous International Pte Ltd with 30%, and Lindo Investment Pte Ltd holds 2%. Huayou has already conducted multiple nickel smelting projects for electrical batteries in Indonesia. Previous efforts include a nickel sulfate smelter constructed alongside Tsingshan Holding Group, located in North Maluku.

Start a Mining Company in Indonesia

It is widely recognized and acknowledged that Indonesia has an abundance of natural resources. Indonesia has consistently faced issues in fully utilizing the quantity of resources. Therefore, opening the door to foreign investors who may wish to invest, specifically in the mining sector, proves beneficial.

Even though the Indonesian government welcomes foreign investors, there are still prominent laws in place that are set out with the specific aim of regulating the activities of foreign investors. One of the stipulations contained within the laws requires foreign investors operating in the mining industry to secure a Mining Business Permit or Izin Usaha Pertambangan.

Law No. 3 the Year 2020 further clarifies the scope of the mining business, which includes all activities within the framework of mineral or coal exploitation from stages of the general investigation, exploration, feasibility study, construction, mining, processing, and/or refining or development and/or utilization, transportation, and sales.

The scope of such activities also includes post-mining activities conducted by business entities. The entities that are entitled and/or obligated to secure a Mining Business Permit are:

• A business entity, namely any legal entity engaged in mining that is established under Indonesian law and domiciled within the territory of the Republic of Indonesia;
• Cooperatives; and
• Private companies.

A Mining Business Permit is to include:

• Company profile;
• Location and area;
• Type of commodity cultivated;
• The obligation to place a guarantee of exploration;
• Working capital;
• Mining Business Permit validity period;
• Rights and obligations of Mining Business Permit holders;
• Mining Business Permit Extension;
• Obligation to settle land rights;
• Obligation to pay state revenue and regional income, including the obligation to pay fixed fees and production fees;
• Obligation to carry out reclamation and post-mining reparations;
• Obligation to prepare environmental documents;
• The obligation to carry out community development and empowerment around the IUP area.

In general, there are several requirements to secure a Mining Business Permit, which are further categorized into:

Administrative Requirements

In this, the administrative requirements to obtain a Mining Business Permit vary from one type of business entity to another. Such that the items that are to be prepared are dependent on the type of business that is requesting a Mining Business Permit.

Technical Requirements

This requirement urges all entities to collaborate with mining and/or geology expert in the field of mining to produce relevant letters and documents. Aside from that, an area map that clearly displays the geographical coordinates is also required.

Environmental Requirements

Entities looking to conduct mining are required to guarantee that they are ready and able to abide by the environmental laws that are applicable in Indonesia and also receive relevant certifications and permits relating to the environment as required by the laws.

Financial Requirements

Amongst others, the financial requirement to be fulfilled are proof of payments, financial statements that a public accountant has audited, and other financial statements correlated with the activities.

It is to be noted that the requirements vary and are based on multiple factors. InCorp is equipped to assist foreign investors looking to start a mining company in Indonesia, especially concerning company registration and business license matters.