Jakarta, Aug 18 (Antara) - PT Freeport Indonesia (FI) has agreed to divest 51 percent of its shares to the Indonesian government as one of the conditions it has to meet in extending its work permit to operate in Indonesia.
PT FI, the US-based gold and copper mining company, will end its contract in 2021 and is seeking to extend it until 2041, but based on regulation, the contract can only be extended for another 10-year period or reviewed in every decade.
However, according to Coordinating Minister for the Ministry of Maritime Affairs Luhut Binsar Pandjaitan, the contract can be made for a period of 20 years until 2041, if PT FI divests 51 percent of its shares.
"Virtually, there is no problem if PT Freeport Indonesia wants to review its contract until 2041 on the condition that it is prepared to divest 51 percent of its stake to the Indonesian government," Pandjaitan noted on August 14, 2017.
The Indonesian government signed its first work contract with Freeport McMoran Inc on April 7, 1967, with exclusive mining rights on a 100 square-kilometer tract in Ertsberg, Papua. The work contract was extended in 1991 and would expire in 2021.
Freeport is now required to divest 51 percent of its shares to the Indonesian government. So far, the Indonesian government only has 9.36 percent of Freeport's shares.
The government has decided that state-owned companies will take over the remaining shares that will be divested by Freeport.
At the office of the Coordinating Ministry for Home Affairs, Jakarta, Monday, Pandjaitan noted that Freeport is prepared to divest and build smelter facilities as required by the government.
"Indeed, Freeport is prepared to divest 51 percent of its shares, build a smelter, and seek a contract extension until 2041. There is actually no problem with this," he explained.
Pandjaitan, who is a former coordinating minister for political, legal, and security affairs, said that regulations in Indonesia state that the extension of mining permits can only be carried out in stages in every 10 years instead of 20 years as demanded by PT FI.
The contract of the company will expire in 2021. It needs be extended, as the contract is required for the smooth implementation of the underground mining development plan.
"Our law stipulates that the contract should first be for 10 years, but I think if Freeport has already divested 51 percent of its stake, there will be no problem to issue a contract until 2041," he remarked.
Furthermore, Pandjaitan said, valuation of the divested shares will be calculated based on the market price without taking into account existing reserves.
"Reserves underground cannot be calculated. We do know how to calculate it based on the universal principles, as they are not yet discovered," he concluded.
Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan recently discussed the contract issue with Freeport McMoran CEO Richard Adkerson in the US.
Jonan stated that positive developments have been made with regard to negotiations with Freeport. Freeport has agreed to build a smelter and continue its operations, he noted.
PT FI has agreed to adopt a special mining business permit (IUPK) instead of a Working Contract (KK) as the legal basis for the working relations between the Indonesian government and PT FI.
It has agreed to build the smelter within five years, or by 2022 at the latest.
"Tripartite negotiations will immediately be conducted involving PT Freeport Indonesia, the finance ministry, and the ministry of energy and mineral resources for a decision to be made regarding issues that have not yet been settled," Jonan remarked in late July.
The government, through the ESDM Ministry, expects to accomplish the negotiations before October.
ESDM Secretary General Teguh Pamudji said the ESDM, Ministry of Finance, and several other agencies have formed a negotiation team to discuss four agenda on the extension of PT FI's operation permit.
The four agenda comprised the divestment of 51 percent of Freeport's shares, extension of its operation permit, construction of a smelter, and investment stability.
The ESDM ministry is in charge of deliberating matters relating to the extension of the operation permit and the construction of the smelter. The government has requested a smelter, whose construction has to be completed by the company by 2022.
PT FI expects the ongoing deal with the Indonesian government to mutually benefit both parties, the company's Executive Vice President Tony Wenas stated.
"Although we should consider the lobbying process, the company hoped the negotiation would immediately result in a final agreement," Wenas noted.
Wenas remarked that both parties discussed the four topics. The ESDM ministry and Freeport discussed the taxation systems. Freeport has called for a "nail down" mechanism, while the government has sought to apply the "prevailing" scheme.
In order to continue exporting concentrates, the company has to pay tax based on the "prevailing" scheme, as Freeport's operational status had changed from KK to IUPK.
***3***(A014/INE)DITED BY INE(T.A014/A/BESSR/F. Assegaf) 18-08-2017 12:31: |
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