Due diligence on a coal concession

Most coal deals in Kalimantan mean buying shares in a company that holds a production licence. You’re paying for the right to mine a deposit for a fixed term, under a quota the ministry approves each year, on land the company still has to secure from the people who hold it.

A data room shows part of that. The rest comes from the ministry’s records, the pit, the haul road and the villages around them. And because you’re buying the company, its debts to the state and to its neighbours come with the shares.

Start with the licence record

In November 2025 the energy ministry counted 871 coal mining business licences (IUPs), 854 of them in production, plus 59 remaining coal contracts of work (PKP2B). Many IUPs were first issued by district heads, who granted most mining licences until the mid-2010s, and a lot of today’s overlapping areas date from that period.

Check the licence against the ministry’s own records rather than a copy from the seller: the number, the holder, the commodity, the stage, the expiry date and the coordinates of the area. Those records are moving to the ministry’s MinerbaOne system, which began replacing the older MODI portal in 2025. Confirm that no other licence overlaps the area, because Law 2 of 2025 lets the government revoke overlapping licences issued before 19 March 2025. A change of shareholders needs the minister’s approval, so make that approval a condition of completion. The licence types and their terms are set out in mining licences in Indonesia.

The work plan and the quota

A production licence doesn’t let a company dig as much as it likes. From 2026 its work plan and budget (Rencana Kerja dan Anggaran Biaya, RKAB) is approved one year at a time again, under Energy and Mineral Resources Minister Regulation 17 of 2025, and the approved tonnage caps what it can produce and sell.

For 2026 the ministry set a national plan of about 600 million tonnes, against 790 million produced in 2025, and many IUP holders got deep cuts. Approvals came late: until 31 March 2026 companies could produce up to 25% of their planned output while they waited. The ministry also required reclamation obligations to be met before it approved an RKAB.

Value the company on its approved RKAB, not on the seller’s mine plan. Ask for the approvals of the past few years with actual output against each, since a run of cuts or late approvals usually has a reason and you’ll want to know it. Ask for the company’s record on the domestic market obligation too, because a shortfall can bring an export ban and compensation payments.

Reserves, strip ratio and haulage

A resource or reserve figure means little without a report under Indonesia’s KCMI code or the Australian JORC code, signed by a competent person. Reading a KCMI or JORC report covers what to look for, and the same codes apply to coal.

Three things then decide whether a coal reserve is worth mining. The first is the stripping ratio: the volume of overburden (the soil and rock above the seam) moved for each tonne of coal, measured in bank cubic metres. Contractors are usually paid per cubic metre moved, so the ratio is often the largest driver of cost per tonne. Compare the ratio in the mine plan with what the pit has achieved in recent years, and ask why if the plan expects less overburden than the pit has been moving.

The second is quality. Calorific value, moisture, ash and sulphur set the price and decide who will buy. Check the lab results in the report against the surveyors’ certificates for actual shipments.

The third is distance: how far the coal goes by road to a jetty, and then by barge to a loading point. Who owns the haul road and the jetty, and whether their permits are in order, matters as much as the kilometres. Coal logistics in Kalimantan covers roads, rivers and terminals.

Land, forest and neighbours

A mining licence doesn’t include the land. Before it starts production, the holder has to settle with whoever holds rights to the land, and in Kalimantan that often means oil palm estates holding a right to cultivate (Hak Guna Usaha, HGU), smallholders with land letters and communities with customary claims. Ask for a map of the plots acquired or compensated, the payments made and the plots still open, and walk the boundary where the pit is heading next.

Check the forest status as well. Where the area lies in a designated forest area, mining needs a forest-use approval (Persetujuan Penggunaan Kawasan Hutan, PPKH) from the Ministry of Forestry. The approved area has to cover the pits, waste dumps and haul roads in the mine plan, and working outside it breaches forestry law, whatever the mining licence says. The environmental approval should match the planned output too.

What the company owes

In a share purchase the company’s debts stay with it, and several of them are owed to the state. Check each of these:

• Reclamation and post-mining guarantees, placed in full and in line with the area disturbed today. On 18 September 2025 the ministry suspended 190 mining licences, 90 of them for coal, for failing to place reclamation guarantees. By late January 2026 only 10 had been reinstated, and the director general said 35 to 45 could be revoked. How the guarantees work is set out in reclamation and closure.
• Royalties and land rent, matched against sales and shipments for each year. An underpayment found later is billed to the company, not to the seller.
• Taxes, including open audits and VAT refund claims.
• Amounts owed to mining contractors, and any claims they’ve raised.
• Court cases, civil or criminal, including disputes over land.

Before you sign

• Get the licence details from the ministry yourself, and have a mining lawyer check how the area was first granted.
• Have your own competent person review the reserve report and visit the pit.
• Reconcile three sets of numbers for the past three years: production reports, shipment surveys and royalty payments.
• Visit in the dry season if the coal moves by river, and meet the village heads along the haul road.
• Cover unpaid royalties, guarantees and land claims in warranties, and hold back part of the price until they’re settled.