Gold project partnerships: joint ventures, earn-ins and offtake

Most outside money reaches an Indonesian gold project through a partnership with the company that already holds the licence. Three rules limit the shape of that deal: the minister has to approve any change of shareholders, the licence can’t be pledged and a foreign-owned producer has to sell down to a minority over time.

Build the deal around those rules and the commercial terms are ordinary. Ignore them and an investor can fund years of exploration and hold nothing it can enforce.

Buying shares in the licence holder

The usual route is to buy or subscribe for shares in the company that holds the mining business licence (IUP). Under Article 93A of the Mining Law (Law 4 of 2009, as amended by Law 3 of 2020), that company can’t transfer ownership of its shares without the energy minister’s approval. Approval can be given only once exploration is finished, shown by resource and reserve data, and once the company meets administrative, technical, environmental and financial requirements.

Article 13 of Government Regulation 96 of 2021 lists them, including the final exploration report, 3 years of audited accounts, a tax clearance letter and 3 years of land rent receipts. A transfer through an initial public offering on the Indonesian stock exchange only has to be reported.

Read literally, the rule leaves little room for a new shareholder during exploration. Ask a mining lawyer how the ministry treats a share issue, as opposed to a sale, and a change of owners above the licence holder before you fix the structure. Moving the licence itself into a new company is no easier: a transfer of the IUP needs the same approval, on the same condition (Article 93). The checks on the licence are in buying into a gold mining licence.

Joint ventures and earn-ins

A joint venture usually means two or more shareholders in the licence holder, or in an Indonesian company above it, bound by a shareholders’ agreement on who funds what and who decides. Foreign capital needs a foreign-owned company, set up as described in setting up a PT PMA.

In an earn-in, the investor pays for exploration in stages and earns a share of the project as agreed spending or drilling milestones are met. Because of the approval rule, the shares often can’t move until exploration is finished. Until then, the investor’s position rests on contracts: a funding agreement, an option over shares and a say in the work programme. Those contracts have to cover what happens if the minister refuses the transfer or the licence lapses first.

Never fill the gap with a nominee. Indonesian law voids agreements to hold shares on someone else’s behalf, and nominee arrangements explains how investors lose assets that way.

Offtake and prepayment

An offtake agreement commits the mine to sell its gold, or part of it, to one buyer on agreed terms. A prepayment adds money up front, repaid in gold or out of sales. Both can fund construction without selling shares.

Indonesian law narrows the security a buyer can take. A licence holder can’t pledge its licence or the minerals in it (Article 93C). Enforcing a pledge over the holder’s shares would itself be a share transfer that needs the minister’s approval. So protection has to come from elsewhere, such as control over the account that receives sale proceeds and guarantees from shareholders.

The sales rules shape the offtake too. Gold has to be refined in Indonesia to a minimum standard, domestic demand comes first and exported gold pays duty, as selling gold from an Indonesian mine sets out. An offtake built on exporting doré may not survive them.

Mining contractors

Many licence holders hire a contractor to strip, mine and haul. The contractor needs its own mining services licence (Izin Usaha Jasa Pertambangan, IUJP). The holder has to use local or national service companies, and may use a foreign-owned one only when no local or national company is available (Article 124). It can’t use its own subsidiary or affiliate on its licence area without the minister’s permission, given only when no comparable service company in the area is available or able (Article 126). However the work is split, the licence holder stays responsible for the mine and its obligations (Article 125).

The 51% divestment

A licence holder with foreign shareholders has to divest at least 51% to Indonesian parties in stages once it’s producing (Article 112 of the Mining Law and Article 147 of Government Regulation 96 of 2021). The timetable starts at 5% and runs from the start of production:

Type of mine	Indonesian share reaches 5%	Indonesian share reaches 51%
Open pit, without its own processing or refining plant	Year 10	Year 15
Open pit, with its own processing or refining plant	Year 15	Year 20
Underground, without its own processing or refining plant	Year 15	Year 20
Underground, with its own processing or refining plant	Year 20	Year 25

The holder offers the shares to the central government, regional governments, state-owned companies and regional government companies, in that order of priority, and they have 90 calendar days to state their interest. If none buys, the shares go by auction to national private companies, which must be wholly Indonesian-owned, and failing that through the Indonesian stock exchange. Later capital increases can’t dilute the divested shares below the required level.

A holder more than 49% foreign-owned can sell foreign shares before its divestment dates, but it has to offer them to state-owned companies first, which have 75 calendar days to answer in writing (Article 148). Since Government Regulation 39 of 2025, the same share-transfer and divestment duties also apply to holders of the old contracts of work.

What to put in writing

Have an Indonesian mining lawyer review each document and check that it covers:

• ministry approval of every share change as a condition, with a long-stop date and what happens if approval is refused
• the earn-in milestones, how spending is verified and what the investor earns at each step
• who prepares and approves the yearly work plan and budget (RKAB) and the exploration programme
• how the divestment will be met, on what price basis and whose shares go first
• offtake pricing and deductions, where ownership of the gold passes and who pays the royalty and any export duty
• deadlock, exit and dispute resolution, including where any arbitration would sit