Decoding Indonesia’s 2025 Mining Reform: From Regulatory Overhaul to Global Industry Reshaping

In 2025, the Indonesian government introduced a series of regulatory measures referred to by the industry as the "new mining policies." These policy packages not only touch upon core aspects such as mining business permits, approval of miners' work plans, and tax systems, but also include unprecedented strict penalties for illegal mining activities. These policies and initiatives signify a fundamental shift in Indonesia's mining governance paradigm. This transformation is redefining the boundaries of opportunities and risks for mining enterprises operating in Indonesia.

• I. Comprehensive Restructuring of Indonesia's Mining Policy System

Indonesia's new mining policies are not a single policy, but a systematic project covering the entire industry chain.

In February 2025, the Indonesian Congress (Parliament) formally passed an amendment to the Mineral and Coal Mining Law, providing a top-level legal framework for subsequent specific regulations. The core of this amendment lies in strengthening the state's control over mineral resources, aiming to ensure the nation secures a larger share of economic benefits from its abundant natural resources.

The Government Regulation No. 8, signed by Indonesian President Prabowo on February 17, 2025, and effective from March 1 of the same year, requires exporters of natural resources (including but not limited to mineral resources) to deposit 100% of their export earnings into designated Indonesian bank accounts for at least 12 months. This measure is significantly stricter than the previous requirement of 30% retention for three months. It aims to increase US dollar liquidity in Indonesia, stabilize the Indonesian currency exchange rate, and enhance national economic resilience.

In April 2025, the officially promulgated and effective Government Regulation No. 19 of 2025 substantially adjusted the mining royalty structure, introducing a progressive tax system for commodities such as nickel, copper, and tin. For the coal industry, the new royalty rates are linked to the Indonesian coal reference price and implement a tiered tax rate based on calorific value and mining method. When the coal benchmark price exceeds $90/mt, the tax rate for some miners increases by 1% compared to the original rate, with open-pit coal mine tax rates ranging from 5% to 13.5%. The significance is that by introducing a price-linked progressive tax mechanism, it aims to increase state revenue and thereby strengthen the government's control over strategic resources, guiding mining investments towards downstream high-value-added industries.

The Government Regulation No. 39 of 2025, promulgated by the Indonesian government in September 2025 and officially implemented from November 1 of the same year, includes two parts: first, the license allocation mechanism. It specifies two mechanisms: public auction and priority granting. The scope of priority granting is significantly expanded to include cooperatives, small and medium-sized enterprises, business entities owned by religious organizations, state-owned enterprises/regional enterprises, private enterprises cooperating with universities, and enterprises engaged in downstream activities. The intention is to make the distribution of mining benefits more inclusive and fair, strengthen the role of specific groups in the national economy, and encourage industry-academia-research collaboration. Second, the investment value assessment criteria. The center of investment value assessment shifts from resource endowment to downstream processing capacity and environmental compliance. The production business license term is extended to 20 years (renewable twice, for 10 years each time); for activities combined with processing or refining, the term can be up to 30 years. The goal is to exchange policy long-term stability for investors' commitments to downstream integrated facilities and higher environmental standards, promoting industrial upgrading and sustainable development.

The Regulation No. 17 of 2025, promulgated and effective by the Indonesian Ministry of Energy and Mineral Resources on October 3, 2025, stipulates that the original three-year work plan and budget approval system is replaced by an annual approval system. All miners must submit the Work Plan and Budget (RKAB) for the following year between October 1 and November 15 each year, and the approval department must complete the approval within 8 working days; otherwise, the system will automatically deem it approved. This change grants the government strong capability to dynamically regulate mining capacity, particularly the supply pace of key commodities like coal and nickel. This marks a fundamental change in the budget approval system for miners.

• II. Trends in Compliance Enforcement and Judicialization in Indonesia's Mining Sector

A prominent feature of the new policies is not only the rules themselves but also the strengthening of enforcement, with environmental compliance becoming a priority in law enforcement.

In June 2025, in the Raja Ampat Islands of West Papua Province, Indonesia, mining permits of four nickel mining companies were directly revoked for violating environmental regulations. This region is internationally renowned for its marine biodiversity and scientific research value. The government's decision clearly signals the elevated priority of environmental protection in mining development, with penalties for illegal mining reaching unprecedented levels.

In September 2025, the Indonesian Ministry of Energy and Mineral Resources announced the suspension of 190 mining business permits, accounting for about 4% of Indonesia's total valid permits, involving various minerals such as coal, nickel, gold, and tin. This large-scale enforcement action directly resulted from enterprises' violations of land reclamation obligations and production quotas, indicating the government's high emphasis on assessing miners' post-mining land reclamation responsibilities and issues like exceeding extraction quotas, with relevant penalties being implemented.

In September 2025, the Weda Bay nickel mine, one of the world's largest nickel mines jointly operated by an Indonesian state-owned mining company and two foreign miners, had its 148-hectare operational area taken over by a government task force due to suspected operations beyond the permitted scope. This action against an industry giant clearly demonstrates the universal applicability and unchallengeable authority of the new policy enforcement.

In December 2025, the Indonesian Ministry of Energy and Mineral Resources issued new regulations stipulating that miners operating illegally beyond their forest permit areas will be fined according to a standard of 354 million to 6.5 billion Indonesian rupiah per hectare, with nickel mining companies facing the highest penalties. The penalty amount is calculated not only based on the illegally occupied area but also on the duration of illegal operations and the category of minerals, indicating that the Indonesian government is implementing a more refined accountability mechanism.

• III. Potential Impact of Indonesia's New Mining Policies on the Global Mining Market

Indonesia's systematic and comprehensive shift in mining policy will have impacts far beyond its borders, reshaping the global mining landscape from three aspects: market supply, investment flows, and global governance.

First, the "planned" nature of market supply intensifies price volatility. The most direct impact comes from the change to an annual approval system for miners' Work Plans and Budgets (RKAB). This gives the Indonesian government an "annual valve" to regulate the global supply of key commodities like nickel, tin, and coal. As the world's largest nickel supplier and a major coal exporter, Indonesia can actively match price targets by tightening or relaxing production quotas to safeguard fiscal revenue. This move will permanently increase uncertainty on the supply side; any rumors about approval delays could trigger sharp price fluctuations. For downstream manufacturers (such as battery and stainless steel companies), decreased supply stability from Indonesia will force them to seek supply chain diversification or increase inventory, thereby raising the overall cost of the global industry chain.

Second, the restructuring of investment logic forces global capital to make strategic choices. The new policies forcibly alter the investment value formula for mining in Indonesia. The inherent resource advantages are giving way to factors such as downstream supporting facilities, ESG compliance, and local contribution. This means that pure mining projects have lost their appeal; capital must flow to value-added segments like smelting and processing while meeting stringent environmental standards. This significantly raises the entry barrier, potentially leading to investment concentration among industry giants capable of handling complex compliance challenges, while small and medium-sized or purely financial investors may be forced to exit. Simultaneously, Indonesia's policy tightening creates alternative investment opportunities for resource-rich countries with stable regulations like Australia and Canada, as well as bauxite producers like Guinea, prompting a reallocation of global mining capital.

Third, the spillover of the governance paradigm sets a model for "refined" resource nationalism. As a major country of critical minerals, Indonesia's policy practices have a strong demonstrative effect. These policy packages signify an upgrade in control strategies for resource-rich countries, from nationalization or export bans to a refined toolbox covering fiscal, licensing, foreign exchange, and environmental factors. This "Indonesian model," aimed at maximizing long-term national benefits, is likely to be emulated by other developing countries rich in natural resources, thereby driving stricter global mining regulations on a broader scale. Furthermore, Indonesia's new policies interact complexly with the supply chain traceability and ESG standards of the US and Europe (such as the US Inflation Reduction Act), positioning itself as a focal point in geo-economic games. Whether its thermal power-based nickel industry chain can meet Western "green" standards will directly impact the layout and costs of the global EV supply chain.

In conclusion, Indonesia's 2025 new mining policies represent a profound revolution in mining governance, with the core objective of transforming resource advantages into maximized, sustainable national interests through systematic control. For the global market, this not only implies reduced elasticity of critical mineral supply and increased price volatility risks but also heralds a fundamental reshaping of the global mining investment logic.

Please note that this news is sourced from China Metal Mining Economic Research Institute and translated by SMM.