Indonesia's mining sector runs on a licence, not a claim. Two types do almost all of the work: the IUP (Izin Usaha Pertambangan, or Mining Business Licence) and the IUPK (Izin Usaha Pertambangan Khusus, the Special Mining Business Licence).
The names look like variants of one another. Functionally they are not. An IUP is the ordinary route into a defined mining area. An IUPK exists in areas the state has held back for strategic reasons, and it is also what a Contract of Work becomes when the contract ends. For a foreign investor the distinction decides which ground is even available, what the holder may do with it, and which set of obligations travels with it.
The definitions below are taken from Government Regulation No. 25/2023 on Mining Areas, the instrument that defines both terms, read on the Indonesian Ministry of Energy and Mineral Resources' legal database (JDIH). The rest of the article draws on the Constitutional Court's own English reports, the Cabinet Secretariat, the ministry's own explainer of the permit procedure, and the U.S. Geological Survey. Everything attributed in the text is attributed to the document it came from.
The two licences, in the regulation's own definitions
Article 1 of Government Regulation No. 25/2023 defines the instruments a foreign investor will meet on a data room shelf:
| Term | Definition given by PP No. 25/2023 |
|---|---|
| IUP | "a licence to carry out Mining Business" |
| IUPK | "a licence to carry out Mining Business in a special mining business licence area" |
| IUPK as a Continuation of Contract/Agreement | "a licence granted as an extension after the completion of a Contract of Work or Coal Mining Concession Work Agreement" |
| IPR | a licence to carry out mining business in a community mining area, with limited area and limited investment |
| SIPB | a rock mining permit issued for particular types of rock or for particular purposes |
Two further definitions carry as much weight. A Contract of Work (KK) is defined as an agreement between the government and an Indonesian legal-entity company to carry out mineral mining; PKP2B is the coal equivalent. And the ground is defined against the licence: WIUP is the area granted to an IUP holder, WIUPK the area granted to an IUPK holder. The regulation does not treat "permit" and "area" as separate subjects, and neither should a buyer.
Where each licence can exist
The structural difference sits in the territory rules, all in the same regulation.
An IUP is issued over a WIUP, inside a WUP — a mining business area, which the regulation describes as the part of a Mining Area (WP) for which data, potential and geological information are available. That is the ordinary case.
An IUPK is issued over a WIUPK, inside a WUPK — a special mining business area, described as an area with data, potential and geological information that can be exploited "for strategic national interest." A WUPK does not appear on a map by itself. Article 44 sets out where one can come from:
- a WPN — a State Reserve Area — that is being worked and therefore changes status;
- a contract or agreement area that changes status to a WIUPK when an IUPK as a continuation of contract is granted;
- an ex-WIUP or ex-WIUPK that the Minister decides to reclassify; or
- an ex-contract area the Minister decides to reclassify.
The WPN is the pivot. The regulation defines it as the part of the Mining Area "reserved for strategic national interest", designated by the Minister and barred from overlapping a WUP, a community mining area or a WUPK. Article 42 then provides that a WPN may be worked, in part or in whole, with the approval of the House of Representatives (DPR) — and that once it is worked, its status changes to a WUPK. The considerations the regulation lists for that change are industrial and energy feedstock for the domestic market, state foreign exchange, potential as a growth centre, change in land-use designation, and large technology and capital requirements.
So the two permits are not two grades of the same thing. An IUP area is ordinary ground that an applicant can obtain through the licensing process. An IUPK area exists because of a decision at the centre: a reserve released, with parliamentary approval, or a contract being closed out.
The IUPK is a product of the contract era
The clearest account of why the second instrument exists comes from the Constitutional Court's English report of a hearing held on 12 January 2026 in a judicial review of the mining law.
According to the Court's report, the government expert Irwandy Arif, a member of the board of experts of the Indonesian Mining Professionals Association, told the panel that the 2009 Minerba Law "marked a fundamental shift from a contract-based regime to a licensing regime," and that the transition "included the adjustment of Contracts of Work and Coal Mining Concession Work Agreements (PKP2B) into Special Mining Business Licenses (IUPK)." The reason given, as reported, was that the contractual regime was largely private in nature, limited the state's regulatory authority, and did not fully integrate social responsibility into public oversight.
The same report records a second expert, Mailinda Eka Yuniza of Universitas Gadjah Mada, describing the Business Licensing mechanism under Article 35 of the law as a legitimate public-law instrument implementing the state's right to control, and arguing that Article 92 — on private ownership of mining output — should not be read as relinquishing that control.
Two operating companies appear in the same report as worked examples:
- PT Vale Indonesia Tbk, described as a pioneer of nickel downstreaming, established in 1968 under a Contract of Work, which "officially obtained an extension of its IUPK until December 28, 2035, as a continuation of its Contract of Work, which was issued on May 13, 2024."
- PT Amman Mineral Nusa Tenggara, whose president director testified in the same hearing as chair of the Indonesian Mining Association, describing the IUPK regime as providing certainty for licence extensions of up to two consecutive 20-year terms and certainty over reserve tenure, which the report calls crucial for long-term planning and investment.
The Cabinet Secretariat's English release of 21 December 2018 gives the earlier, same-instrument example. It records that the state mining holding's acquisition of a majority stake in PT Freeport Indonesia was marked by the issuance of a Special Mining Business Licence for Operation and Production (IUPK-OP) "to replace Contract of Work (KK) of PTFI which was entered into force in 1967 and renewed in 1991 that will expire in 2021". The release states that with that IUPK the company obtained "an extension of the 2x10 year operating period until 2041" and an obligation to build a smelter within five years, alongside the divestment that took state ownership from 9.36 percent to 51.23 percent.
Who may hold one, and who decides
On the IUP side, the ministry's own explainer of 12 April 2011 — written on the issuance procedure for rock-commodity IUPs under Law No. 4/2009 and its implementing regulation PP No. 23/2010 — describes the mechanics. An IUP is granted on application by a *badan usaha* (business entity), a *koperasi* or an individual, in two stages: IUP Eksplorasi and IUP Operasi Produksi. It is issued in two steps, first the area (WIUP), then the licence. The same page sets out a three-tier split of issuing authority according to geography: the minister for areas crossing provincial boundaries or beyond 12 nautical miles from the coastline, governors for areas crossing regencies within one province or between 4 and 12 miles, and regents and mayors for areas inside one regency or city, or up to 4 miles.
Read that page as dated. It describes the position when the 2009 law was still new, and the law has been amended since — by Law No. 3/2020, and, in the Constitutional Court's description, by Law No. 2 of 2025. The current regulation, PP No. 25/2023, places area decisions with the Minister: the size and boundaries of WIUPK for metal minerals and coal are set by the Minister after determination by the governor, and WIUP for certain non-metal minerals and rock are set by the Minister on application from a business entity, a cooperative or a sole proprietorship. The Constitutional Court's report likewise describes Article 35 of the law as dealing with "licensing authority vested in the central government."
On the IUPK side, the two official documents read for this article describe two ways in and no general application route. An IUPK arrives when a Contract of Work or PKP2B ends and is extended as a continuation, or when a State Reserve Area is released for exploitation with DPR approval and becomes a WUPK. If a marketed project claims an IUPK, the question worth asking is which of those two it came from, because that determines whether the obligations attached to it were set by statute or negotiated in a conversion.
Why the distinction is a diligence question, not a formality
- It tells you where the ground came from. An IUP sits inside an ordinary mining business area. An IUPK sits inside an area that was either a state reserve requiring parliamentary approval to release, or a contract area being converted. Those histories are not equivalent.
- A contract-legacy IUPK carries negotiated obligations. In the Freeport conversion, the licence came with a 2x10-year extension to 2041 and a five-year smelter obligation, alongside majority state ownership. In PT Vale's case the IUPK valid to 28 December 2035 came alongside a divestment that made MIND ID the largest shareholder — a transaction we described in [Indonesia Mining Companies](/en/news/indonesia-mining-companies). Where the licence is a continuation, the terms of the continuation belong in the file.
- Both instruments are revocable. The ministry's 2011 explainer lists the administrative sanctions available to the issuing authority against an IUP holder: a written warning, suspension of part or all of exploration or production, or revocation of the IUP.
- Working without one is a criminal offence. The same page states the penalty under the 2009 law for mining without an IUP — up to 10 years' imprisonment and a fine of up to Rp10 billion — and the same penalty for handling, processing, transporting or selling minerals not produced by a licensed holder. We did not read a current restatement of those penal provisions, so treat them as the 2011 position.
- The statute is being tested right now. The Constitutional Court is hearing Case No. 184/PUU-XXIII/2025, a review of the mining law filed by six citizens, challenging Article 35 on licensing authority and Article 92 on IUP and IUPK holders' ownership of production results. The Court's report summarises the petitioners' argument as being that the law shifts the state from controller of natural resources to a recipient of levies from mining businesses, and the government's position as being that the licensing instruments are constitutional. A ruling would bear directly on who issues these licences and who ends up owning what they produce.
- The sources do not agree on which version of the law is current. The U.S. Geological Survey's Indonesia profile names Law No. 4/2009 and amendment Law No. 3/2020 as the legal framework for the sector. The Constitutional Court's report of January 2026 describes the law under review as Law No. 4 of 2009 "as amended by Law No. 2 of 2025", and the hearing is captioned on that basis. Both are official sources; we state both and reconcile neither.
The sequence, sourced
| Date | Event | Source |
|---|---|---|
| 1967, renewed 1991 | PT Freeport Indonesia's Contract of Work enters into force, is renewed, and runs to 2021 | Cabinet Secretariat |
| 2009 | Law No. 4/2009 moves mining from a contract-based regime to a licensing regime; Contracts of Work and PKP2B are adjusted into IUPK | Constitutional Court |
| 2018 | PTFI's contract is replaced by an IUPK-OP with a 2x10-year extension to 2041 and a smelter obligation | Cabinet Secretariat |
| 2020 | Law No. 3/2020 amends Law No. 4/2009 — the version USGS cites as the framework | U.S. Geological Survey |
| 2023 | Government Regulation No. 25/2023 defines IUP, IUPK, WPN, WUPK and WIUPK, and sets out how a WUPK comes into existence | JDIH, Ministry of Energy and Mineral Resources |
| May 2024 | PT Vale Indonesia's IUPK is issued as a continuation of its contract, valid to 28 December 2035 | Constitutional Court |
| January 2026 | The Constitutional Court hears a challenge to Articles 35 and 92 of the mining law, which it names as Law No. 4/2009 as amended by Law No. 2 of 2025 | Constitutional Court |
Catatan Teramine
This section is Teramine's editorial assessment, not a statement from any government body.
For a foreign reader, the practical point is that the permit name is the shortest possible summary of a mining asset. It tells you whether the ground was ordinary or reserved, whether the holder is standing inside a contract that has been wound up, and whether the obligations on the asset are statutory or negotiated. An IUP is a statutory instrument. An IUPK that continues a contract is a negotiated instrument with a statutory wrapper, and the negotiation is usually still visible in the file.
What we could not source, and therefore did not state: the current validity period of an IUP; the current renewal windows and how many times a licence may be extended; the text of Law No. 2 of 2025; how many IUPKs exist or how much ground they cover; and any royalty, PNBP or divestment percentage for either instrument. One gap is worth naming rather than hiding. The 2011 ministry explainer says an IUP may be held by a business entity, a cooperative or an individual, while PP No. 25/2023 refers to a cooperative or sole proprietorship applying for certain non-metal and rock WIUPs — we did not read a source that resolves what an individual may hold under the law as it now stands, so we have not resolved it either.
The backlog entry behind this article instructed that transfer mechanics should not be described unless they could be sourced. They could not, so they are absent. For assets where this distinction is already known and the question is transactional, the [mining marketplace](/en/marketplace) is where Teramine lists them. For permit, RKAB or IUPK work on a holding you already have, see [mining permit services](/en/layanan-izin).
Sources
Every definition, figure and quotation in this article comes from the five documents below, each of which was opened and read for it. Where a statement is attributed in the text to the Constitutional Court, the Cabinet Secretariat, the Ministry of Energy and Mineral Resources or the USGS, that is the document it came from.
The commodity background to these instruments is in our pieces on [nickel mining investment in Indonesia](/en/news/indonesia-nickel-mining-investment-2026), [copper mining in Indonesia](/en/news/copper-mining-in-indonesia) and [coal mining in Indonesia](/en/news/coal-mining-in-indonesia), and the ownership structures that sit on top of the licences are set out in [Indonesia Mining Companies](/en/news/indonesia-mining-companies).
