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oal miner PT Berau Coal, a subsidiary of Jakarta-listed PT Berau Coal Energy (BRAU), has signed a memorandum of understanding (MoU) with the government regarding detailed talks on the company's coal-mining contract of work (CCoW).

The Energy and Mineral Resources Ministry's director for coal, Bambang Tjahjono, said his office and Berau Coal signed the MoU on Friday morning, as part of a series of contract renegotiations between the ministry and miners to comply with the 2009 Mining Law.

Under the MoU, Berau Coal has agreed on principal to adjustments to a number of aspects of its CCoW, including the size of its mining area and a royalty payment to the government of 13.5 percent.

'We will now move forward to draft the contract amendment, in which we will adjust several issues until the company's contract of work expires,' Bambang said.

'After the expiry date, all matters will be based on the prevailing law.'

The ministry's minerals and coal director general, R. Sukhyar, earlier said renegotiations with Berau Coal had progressed slowly because the government wanted to erase a mechanism that allowed Berau Coal to only pay 11 percent in royalties if it sold coal from the government's share, while the other 2.5 percent was calculated as transportation costs.

Besides the royalty issue, Berau Coal has also in principal agreed to reduce its mining area by 10,391 hectares, according to Bambang.

The reduction means the company will only manage 108,009 ha until its CCoW expires in 2025, from its previous 118,400 ha.

Under the Mining Law, coal-mining concessions are limited to 15,000 ha.

'After the contract expires, all will be according to the law; even more sites will be released,' Bambang said.

Neither Berau Coal president director Amir Sambodo nor general manager for corporate communication Singgih Widagdo replied to text and phone calls from The Jakarta Post seeking confirmation.

The government has been struggling to renegotiate numerous coal and mineral contracts of work (CoWs) to comply with the law.

The renegotiations are focused on six issues, adjustments in income to the state; adjustments to the size of mining areas; obligations of divestment; obligations for domestic processing; continuity of operations; and obligations to use local goods and services.

The renegotiations should have been completed one year after the 2009 Mining Law was passed.

Seventy-three CCoWs and 34 mineral non-coal CoWs need to be renegotiated. Berau Coal's MoU signing follows previous deals between the government and other big coal players, including PT Kaltim Prima Coal (KPC), PT Arutmin Indonesia and PT Adaro Indonesia.

Under its MoU with the government, KPC agrees to reduce its mining size to 84,938 ha from its current 90,938 ha. Arutmin's mining area will be cut to 55,573 ha from 58,898 ha.

Meanwhile, Adaro has agreed to release around 6,000 ha of its 34,940 ha.

The signing of the MoUs also means that the companies have in principal agreed to see their CoWs, which vary from one company to another, changed into coal-mining permits, which apply in general according to the law, in return for extensions to their operations.

'However, a decision on extension ' if any ' will be determined by the new government, and it will consider the company's performance in good mining practices and the fulfillment of its obligations to the government,' Sukhyar said.

Companies are allowed to apply for operating extensions two years prior to their expiry date. The extension is limited to two extensions of 10 years.

Arutmin's CCoW will expire in 2019 and that of its sister company KPC in 2021, while Adaro's CCoW will last until 2022.