The Government recently issued the implementing regulation on mining supervision under the 2009 Mining Law ("Regulation 55"), which regulates supervision, consultation and guidance on mining activities. The content of Regulation 55 is somewhat generic and procedural, but it essentially governs supervision over several aspects of mining activities, including: (i) mining technicalities; (ii) marketing; (iii) financing; (iv) environmental management and post-mining activities; (iv) coal and mineral resources conservation; and (vi) coal and mineral data processing. Supervision will be conducted periodically, through evaluation of the license holders' activities report and business plan, as well as site inspection on a periodic and spot basis.

Financial oversight includes supervision of all monetary obligations such as budgeting, investment realization and fulfillment of dead rent, royalty and (in the case of special mining business license (IUPK Operasi Produksi) holders) 10% of net profit payments. Supervision over coal and mineral resources conservation and environmental management will be conducted by a Mine Inspector, who will carry out the relevant supervision through: (a) periodical or spot evaluation of the mining companies' reports; (b) periodical or spot inspections; and (c) assessment of the success level of the mining companies' compliance activities and programs. The Mine Inspector can ultimately suspend any mining operations that are deemed to be hazardous or unsafe for the employees, public or the environment or further recommend that such suspended operations be permanently discontinued. Implementing regulations on appointments of the Mine Instructor will be issued further. We will keep you updated on this.

In summary, Regulation 55 is intended to improve the oversight and supervision of mining operations. Its effectiveness is still yet to be tested, but the spirit and intent is quite clear. Mining companies will need to take a close look at the supervision procedures in Regulation 55 for compliance and disclosure purposes.

* O'Melveny & Myers LLP is not licensed to practice law in Indonesia, and this Client Alert should not be construed as providing advice concerning the laws of Indonesia or of any other country or jurisdiction. The foregoing should not be construed as an opinion on the laws of Indonesia. Readers should consult with Indonesian counsel for legal advice on the matters addressed herein.

O'Melveny & Myers LLP routinely provides advice to clients on complex transactions in which these issues may arise, including finance, mergers and acquisitions, and licensing arrangements. If you have any questions about the operation of the applicable statutory provisions or the case law interpreting these provisions, please contact any of the attorneys listed on this alert.

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