Indonesia Increases Mining Royalties in 2025: What it Means for Investors

Indonesia has approved a significant overhaul of its mining royalty framework, reinforcing its ambition to capture more economic value from mineral resources. The move, announced in April 2025, targets increased returns from mineral extraction while aligning with the broader industrial goals of the Prabowo Subianto administration.

The changes come at a pivotal time. As global demand for critical minerals intensifies, Indonesia is seeking to reposition itself not just as a major supplier but as a resource-driven economy that captures greater returns from downstream activity.

New royalty structure and what it covers

The revised royalty rates apply to a range of mineral commodities and now reflect both grade and market value. Unprocessed high-grade nickel ore, for example, may attract rates of up to 10 percent, depending on export volume and price. The framework favors processed minerals, reinforcing Indonesia’s push for industrial value addition.

The updated structure shifts from fixed rates to a more flexible, value-based calculation method, anchored in international prices and actual mineral content. This approach aligns royalty payments more directly with profitability, introducing greater transparency and accountability into the system.

Policy goals behind the reform

The government has positioned the royalty hike as essential to financing national priorities, ranging from food security and infrastructure to defense modernization. Yet beyond revenue, the policy reinforces a long-standing goal: transforming Indonesia from a raw commodity exporter into a high-value manufacturing and processing hub.

By offering preferential rates for refined output, the government is sharpening the incentive for companies to invest in smelters and processing facilities. These measures tie fiscal strategy to industrial policy, ensuring that resource extraction also delivers domestic economic development. For investors, the message is clear: Indonesia favors capital that supports value addition within its borders.

Industry response reflects varied exposure

Reactions across the mining sector have been mixed. Large integrated producers with downstream capacity, particularly those already operating smelters, are well-positioned to absorb the changes. However, upstream-focused firms, especially those exporting unprocessed ore, face tighter margins and increased regulatory scrutiny.

Fitch Ratings assessed the changes as “largely neutral” for the sector’s credit profile, noting that well-capitalized companies should remain resilient. That said, smaller operators and greenfield projects may be more vulnerable. Several industry groups have warned that the reforms could slow project development timelines and prompt some players to reassess exploration investments.

Concerns have also been raised about the valuation process under the new model, particularly in a volatile commodity price environment. For foreign investors, navigating this complexity will require stronger regulatory engagement and scenario planning.

Adapting investment strategies in a shifting environment

The new royalty regime introduces higher compliance burdens and may alter project economics, especially for operations relying heavily on raw material exports. Investors will need to recalibrate their cost structures and reassess the viability of expansion plans under the updated rules.

However, the policy also presents opportunities. Companies that commit to domestic processing benefit from reduced rates and long-term regulatory support. The move may also create room for strategic partnerships with Indonesian stakeholders, enabling risk-sharing and alignment with local development goals.

Striking a balance between state revenue and investor confidence

Indonesia’s royalty reforms signal a more assertive resource governance model that aims to strengthen state revenues without sidelining credible investors. While the changes will introduce new challenges, they also clarify the government’s long-term direction: value creation through industrial integration.

• Previous Article Samsung’s $1 Billion Bet on Philippine Manufacturing
• Next Article Singapore’s May 3 Election: Implications for Foreign Investors