TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
New mining royalty structure’s implications for investment
The introduction of higher royalties is a double-edged sword for direct investment.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Excavators transfer soil to transport trucks on July 28, 2023, at a nickel mine operated by nickel mining company Vale Indonesia in Sorowako, South Sulawesi. (AFP/Hariandi Hafid)
I
n a significant policy shift, the government has recently announced an increase in mining royalties through Government Regulation (PP) No. 19/2025. This move, aimed at bolstering state revenues to fund President Prabowo Subianto's ambitious policy initiatives, has sparked considerable debate within the industry.
The new royalty structure, which replaces the previous flat levies with a variable rate dependent on commodity prices, is expected to have far-reaching implications for direct investment in Indonesia, particularly in the construction of smelters and the broader downstream industry.
The revised royalty rates represent a progressive scheme where the levies vary based on global market prices.
For instance, the royalty on nickel ore production now ranges from 14 percent to 19 percent, depending on price levels set by the government. Lower-grade ore processed into battery-grade nickel will face a smaller 2 percent royalty, incentivizing domestic processing and value addition.
This dual approach pressures raw ore exporters while rewarding domestic refiners, aligning with Indonesia's long-term goal of enhancing its downstream industrial capabilities.
Additionally, the new regulation also adjusts royalty rates for other key minerals: Tin ore (3 to 6 percent), copper ore (4 to 7 percent), silver (3.25 percent) and bauxite ore (3 to 5 percent), as well as gold (3.75 to 5 percent), depending on the Mineral Reference Price (HMA).
Coal royalties are also progressive, based on calorific value and the Coal Reference Price (HBA). In addition to the increased royalty rates, the regulation also maintains provisions for land rent and exploration rent/levies.
