【SMM Analysis】190 Mining Companies Temporarily Sanctioned by ESDM: Current Impact and Updates Towards Nickel Ore Producers

Introduction
On September 18th 2025, The Ministry of Energy and Mineral Resources of Indonesia, through the Directorate General of Minerals and Coal, issued Letter No. T-1533/MB.07/DJB.T/2025 imposing administrative sanctions on 190 mining companies that failed to provide reclamation guarantees, ordering the "temporary suspension" of their operations. Most of the list comes from coal producers, and while some others are from nickel, manganese, steel, gold, and etc.

Letter No. T-1533/MB.07/DJB.T/2025

I. Overview of Reclamation Guarantee:

1. Definition

Based on the Government Regulation No. 78 of 2010, the IUP (Mining Companies) either in Exploration or Production Operation stage must carry out reclamation and post-mining activities. According to Article 3, the reclamation must include:

• Exploration reclamation must meet:

  1. Environmental protection and management： Safeguard water, soil, air, biodiversity, and structural stability; reuse mined land appropriately and respect local social and cultural values.

  2. Occupational health and safety (OHS)：Ensure worker safety and prevent occupational diseases.

• Production reclamation and post-mining must meet:

  1. Environmental protection and management:

  2. Occupational health and safety

  3. Mineral and coal conservation：Optimize mining and processing, manage low-grade and by-product minerals, record unmined resources, and comply with radiation safety for radioactive materials.

2. System (Based on Article 5-7)

• Exploration holders must prepare a reclamation plan before exploration, based on an approved environmental document, and include it in the exploration work plan and budget. After feasibility studies, they must submit reclamation and post-mining plans to the Minister, governor, or local authority, usually together with the Production IUP application. Reclamation plans are prepared for 5 years, or adjusted to mine life if less than 5 years.

• Plans must include:

  • Land use before and after mining

  • Land clearing plans

  • Programs for reclaiming disturbed land (temporary/permanent)

  • Success criteria: land shaping, revegetation, civil works, final completion

  • Costs: direct and indirect

Articles 31–34 stipulate that IUP and IUPK holders must provide a reclamation guarantee for the production operation stage, which can take the form of a joint account, time deposit, bank guarantee, or accounting reserve, and must be placed within 30 days of plan approval. However, placing the guarantee does not relieve the holder of the obligation to carry out reclamation. If the reclamation is found unsuccessful, the authorities may assign a third party to complete it using the guarantee. Any shortfall in funds remains the holder’s responsibility, while any excess can be withdrawn after approval by the relevant authority.

Article 35 stipulate that "Holders of IUP or IUPK may submit a request for disbursement or release of the reclamation guarantee to the Minister, governor, or regent/mayor based on the level of reclamation success.”

III. SMM's Analysis: Future Impact of "Not Paying Reclamation Guarantee"

1. Supply Uncertainty

The number of companies affected in the coming days could potentially be higher than this amount, if it aligns with Prabowo’s regulations addressing the 1,063 illegal mines recently. Due to the unknown number of exact nickel companies included in those "1,063" nickel mines, there is a probability that other mining companies might also been affected in the future, which might reduce the potential nickel supply to the Indonesian market

2. "Improved" Market Sentiment
The ongoing investigation by the Forestry Task Force, coupled with the ESDM’s stern warning for mining companies to fulfill their reclamation guarantees, has created a market sentiment that nickel prices may rise, giving certain nickel producers a potential competitive advantage.

IV. SMM's Analysis of Future Price

Nickel Ore Price Outlook:

• Pyrometallurgical Ore:

From the supply side, the rainy season has mostly passed in this month, which potentially improves mining conditions. The approval of RKAB in 2025 has reached 310+ million tonnes (SMM), which also provides a positive sentiment of additional supply. The demand from pyrometallurgical smelters do slightly improve due to some smelters recovering their production from previous maintenance and positive upward trend of NPI prices. Overall, with the anticipation of new RKAB regulation in October as well as the current strict regulations towards nickel mines, it is predicted that the nickel ore price might remain on this high level with limited price decline, with current mainstream premium relatively around $24-$26

• Hydrometallurgical Ore:

From the supply side, the production might not be as plentiful as saprolite from the profitability standpoint, but still sufficient for the current demand. From the demand side, according to our understanding there is no further production increase of HPAL products in this September. However, anticipating that the new HPAL producers are starting their early ore procurement, and HPAL smelters have relatively ample ore supply in September, the price decline are also expected to be limited.

In summary, the significant impact towards current nickel ore supply to the smelters might not be impacted for now. However, another round of RKAB submission's regulation as well as investigations of Forestry Task Force remain as a key driver that impacts the nickel ore production. SMM will continue monitoring the Indonesian domestic market supply-demand dynamics and the progress of RKAB submission to provide timely updates and insights.