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How to Obtain a Mining Business License (IUP) in Indonesia

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Indonesia is the world’s treasure chest for minerals—nickel, coal, bauxite, gold, copper, and tin. With over 17,000 islands, Indonesia is not just an archipelago; it is a mining frontier that continues to attract global interest. But before a single shovel hits the ground, a company must secure what is legally non-negotiable: a Mining Business License (IUP – Izin Usaha Pertambangan).

This article is your guide on how to legally and effectively obtain a Mining Business License (IUP) in Indonesia. Whether you’re an investor, a mining company, or a foreign entity looking to enter this sector, this resource is designed to walk you through the legal terrain step-by-step.

Key Takeaways

  • A Mining Business License (IUP) is legally required for any mining activity in Indonesia, whether exploration or production.
  • Both local and foreign investors can apply, but foreign entities must establish a PMA and meet BKPM and OSS requirements.
  • The application process involves legal incorporation, environmental approvals (UKL-UPL or AMDAL), technical plans, and financial proof.
  • IUPs are regulated under Law No. 3/2020 and related ESDM regulations, with licenses issued by either local or central authorities.
  • Kusuma & Partners offers end-to-end legal support to streamline IUP applications, ensuring full compliance and risk mitigation.

What is a Mining Business License (IUP)?

A Mining Business License (IUP) is a legal permit issued by the Government of Indonesia that grants companies the right to conduct mineral exploration and exploitation activities. It functions both as a legal foundation and as a compliance tool. Without an IUP, any mining activity—no matter how small—is illegal and subject to criminal prosecution.

The IUP ensures:

  • Legal certainty for investors
  • Environmental accountability
  • Access to mineral reserves within a defined area
  • Fiscal and regulatory transparency

Legal Framework for Mining Licenses in Indonesia

Indonesia’s mining sector is governed by an intricate set of laws and regulations. The primary legal basis for IUPs is:

These regulations aim to balance investment incentives with resource governance, environmental protection, and community interests.

Types of Mining Licenses in Indonesia

Understanding the types of mining permits is crucial before applying. The most relevant types include:

License TypeDescription
IUPStandard license for exploration and production for private companies
IUPKSpecial license for operations in state-reserved zones
IPRSmall-scale mining license for individuals or cooperatives
SIPBSpecific for quarrying or non-metallic minerals

For most commercial investors, the Mining Business License (IUP) is the go-to license.

Who Can Apply for a Mining Business License (IUP)?

Entities eligible to apply for an IUP include:

  1. Indonesian Legal Entities – Domestic companies (PTs)
  2. Foreign Investment Companies (PMA) – Must be established under Indonesian law and registered with BKPM (Investment Coordinating Board)
  3. State-Owned Enterprises (BUMN) and Regional-Owned Enterprises (BUMD)
  4. Cooperatives or individuals, for small-scale IPRs

Foreign investors must set up a PMA company under Indonesian law and comply with foreign ownership limits (as per the Positive Investment List).

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Stages of Mining Activities in Indonesia

The mining lifecycle in Indonesia consists of:

  1. Exploration Stage – Initial geological and geophysical studies
  2. Feasibility Study Stage – Assessment of reserves, environmental impact, and economic viability
  3. Construction Stage – Site preparation and infrastructure
  4. Exploitation Stage – Full-scale extraction and production
  5. Post-Mining Stage – Reclamation and community rehabilitation

Each stage has different IUP classifications e.g., IUP Eksplorasi vs IUP Operasi Produksi.

Step-by-Step Process to Obtain an IUP

This is the most critical section for businesses. Let’s break it down:

a. Preliminary Corporate Requirements

  • Establish a legal company in Indonesia (PT or PMA)
  • Register with OSS (Online Single Submission) system
  • Obtain NIB (Business Identification Number)
  • Secure land data and confirm zoning compatibility

b. Application Submission

  • Prepare an official application through the Minerba One Data Indonesia (MODI) system
  • Submit to the local ESDM office or directly to the Ministry of ESDM (for strategic minerals)

c. Technical and Administrative Evaluation

Authorities will assess:

  • The Work Plan and Budget (RKAB)
  • Company legality and management
  • Proof of financial capacity and capital adequacy
  • Environmental documentation (UKL-UPL or AMDAL)

d. Issuance of the Mining Business License (IUP)

If approved, the IUP will be:

  • Registered on the OSS system
  • Published in the National Licensing Database
  • Associated with a specific WIUP (Mining Permit Area)

Required Documents for the IUP Application

An IUP application includes at least :

  • Deed of Establishment & Company Legalization
  • Articles of Association
  • NIB (Nomor Induk Berusaha)
  • Mining technical documents (maps, feasibility study)
  • Environmental compliance (UKL-UPL/AMDAL)
  • Proof of financial capacity
  • Power of attorney (if using a consultant)

Failure to include even one document could lead to automatic rejection.

Authorities Involved in the IUP Process

  • Ministry of Energy and Mineral Resources (ESDM): Primary licensing body
  • BKPM (now Ministry of Investment): For foreign investment approvals
  • Local Governments: District-level IUPs
  • Ministry of Environment and Forestry: Environmental and forestry use licenses

Understanding jurisdiction is crucial. Regional mining is governed locally, while cross-province or strategic mineral operations are centralized.

Key Compliance and Reporting Obligations

Once you have secured your Mining Business License (IUP), the work has just begun. IUP holders must:

  • Submit quarterly and annual RKAB (Work Plans)
  • Report production volumes and sales
  • Pay royalties and non-tax state revenues (PNBP)
  • Fulfill community development (PPM) programs
  • Conduct post-mining reclamation

Failure to report could result in:

  • Fines
  • License suspension
  • Criminal liability under Mining Law Article 161

Common Pitfalls and How to Avoid Them

Here’s what often goes wrong:

  • Incomplete application: Especially environmental documents
  • Wrong licensing authority: Local vs central confusion
  • Undercapitalization: Not meeting minimum capital requirements
  • Incorrect WIUP boundaries: Overlapping with protected zones or concessions

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Practical Commentary from Kusuma & Partners

We often assist clients who attempted to apply on their own and ran into major setbacks—wrong WIUPs, delayed environmental approvals, or rejected due to weak financial documentation. These errors cost months of time and millions in opportunity loss. Our firm has deep working knowledge with ESDM and local governments to ensure your Mining Business License (IUP) is issued efficiently and correctly.

Conclusion

Securing a Mining Business License (IUP) is not just a regulatory step—it’s a strategic advantage. A properly issued and managed IUP ensures your business is protected, profitable, and respected by the government and communities.

How We Can Help

Don’t leave your mining business vulnerable to costly delays or legal exposure. Let us handle your licensing and compliance so you can focus on growing your investment in Indonesia’s booming mineral sector.

Fill in the form below to get our legal expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

Yes, through a PMA company, but subject to the current foreign ownership caps.

Yes, but it requires ESDM approval and compliance checks.

Wilayah Izin Usaha Pertambangan – the designated mining area that is allocated for licensing.

Yes, for non-compliance with reporting, financial, or environmental obligations.

We offer unmatched expertise, real-time regulatory insight, and direct connections with decision-making authorities to fast-track your IUP application.

Contact us

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