Buying into a gold mining licence: due diligence

Buying into a gold project in Indonesia nearly always means buying shares in the company that holds the mining licence (IUP). The licence can’t be transferred without the approval of the Minister of Energy and Mineral Resources, and the holder’s shares can’t change hands without it either (Articles 93 and 93A of Law 4 of 2009 on mining, as amended by Law 3 of 2020). So what you buy is the company, with every obligation it carries and every step it skipped.

The checks below decide whether the licence is worth what the seller says. Most of them can start before a term sheet, from documents a serious seller already has.

Check the licence against the ministry’s records

A copy of the licence in a data room proves little. Have a mining lawyer check it against the ministry’s own records: the licence number, the holder, the commodity, the stage, the area and the expiry date. The ministry’s mining data system (MODI) has been moving its services to a new platform, MinerbaOne, since 2025, and licences are issued through the OSS system, so the check may need both.

Then check the area itself. Plot the coordinates and compare them with neighbouring licences, plantation rights and any people’s mining areas nearby. Law 2 of 2025 lets the government revoke licences issued before 19 March 2025 whose areas overlap others and return the land to the state. An overlap is now a direct threat to the licence.

Look at the stage and the time left. A metal exploration IUP runs for up to 8 years, and a production IUP for up to 20 years plus two extensions of 10 years each (mining licences sets out the terms). An exploration licence close to its end with no feasibility study is weaker than it looks. Check the company’s deed history too: every past change of shareholders should carry the minister’s approval.

The work plan and what has been paid

Each year the holder needs an approved work plan and budget (Rencana Kerja dan Anggaran Biaya, RKAB), which sets what it may explore or produce. Three-year approvals have been dropped. Under Minister of Energy and Mineral Resources Regulation 17 of 2025, in force since 3 October 2025, the RKAB is annual again from 2026. Ask for the approved RKABs for the last few years and for 2026, and compare them with actual production and spending. A producer without an approved RKAB for the year has no legal basis to mine.

Ask for proof of payment of the state charges: the royalty on production (iuran produksi) and the annual land rent on the licence area (iuran tetap). Arrears stay with the company after you buy in.

Then the guarantees. Every holder has to place a reclamation guarantee and a post-mining guarantee (Article 100). If it doesn’t carry out its approved plan, the minister can appoint a third party to do the work and pay for it from those funds. A former holder that walks away without reclaiming, or without placing the guarantee, faces up to 5 years in prison and a fine of up to IDR 100 billion (Article 161B). When the ministry moved back to annual RKABs, only producers that had placed their 2025 reclamation guarantee could keep mining at a reduced rate while their 2026 plan was pending. Treat unfunded closure as debt.

Forest, land and the environment

An IUP gives no right to the land. Before production, the holder has to settle land rights with the people who hold them, in stages if needed (Article 136). Ask for the land acquisition records and the compensation agreements, and check them against the map.

Find out whether any part of the area lies in a designated forest area. Mining there needs a forest-use approval (persetujuan penggunaan kawasan hutan, PPKH) covering the ground actually worked. Without one, the mining is illegal whatever the IUP says. Forest area status explains how to check. The 2026 RKAB transition also required a PPKH for licence areas inside forest.

The environmental approval has to match the mine you’re buying. It rests on an environmental impact assessment (AMDAL) or a lighter management plan (UKL-UPL) under Government Regulation 22 of 2021, and it’s based on a stated production rate, processing method and tailings plan. A mine that has grown past its approval needs a new one.

People already on the ground

In Kalimantan, a gold licence area often has small miners working it without permission. Their presence brings safety risks and mercury contamination, strains community relations and leaves damage inside the licence area that is hard to separate from the holder’s own. Moving them off takes the police and the local government, and it can start a conflict that outlasts the exploration programme. Illegal gold mining covers the penalties and how holders respond.

Visit the site with your own geologist. Talk to the villages along the river, not only to the seller’s staff, and ask who claims the land and on what basis.

Before you sign

Put these on the list before any money moves:

• a licence search by an Indonesian mining lawyer, run against the ministry’s records
• an independent review of any resource estimate by a competent person
• receipts for royalties and land rent, and proof that the guarantees are in place
• the forest-use approval, the environmental approval and the land records
• ministry approval of the share transfer as a condition of closing
• warranties and indemnities from the seller for what happened before closing, backed by an escrow or a holdback

A foreign buyer also has to fit the deal to the rules on company structure and on divestment by foreign shareholders. Partnering on a gold project covers those structures.