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T Freeport Indonesia, operator of the Grasberg gold and copper mine in Timika, Papua, said Friday that it was open to the possibility of discussing the renegotiation of its mining contract with the government of Indonesia.

“We’re open to talks on our activities, future plans and the content of the mining contract with the government of Indonesia,” company spokesperson Ramdani Sirait told reporters in an exclusive interview at Freeport’s office in Jakarta.

However, he declined to comment on whether the company and the government had met to start discussions on renegotiation.

According to the Minerals and Coal Directorate General at the Energy and Mineral Resources Ministry, several issues will be discussed with Freeport in the renegotiation, including royalties, divestment, the size of the mining concession, the ban on raw material exports, the utilization of domestic services and the contract period.

Earlier, Freeport said it would honor and comply with the current mining contract. The company believed that the contract was fair to all parties and resulted in significant contributions to the government.

Ramdani explained that the contract had been implemented in December 1991 and would expire in 2021. However, the contract could be extended twice for 10-year periods if the company so wished,
he added.

He revealed that some clauses in the contract had given many benefits to the government, such as the one on institution income tax payments. Despite the 2008 law on institution income tax stating that mining companies have pay only 25 percent institution income tax on its total profits, the contract stipulates that the company must pay 35 percent.

Minerals and Coal Director General Thamrin Sihite said earlier that Freeport was among the mining companies that had not agreed to the government’s request to renegotiate its contract. He claimed that around 65 percent of the mining companies operating in the country had agreed to renegotiate.

According to the ministry, 42 mining companies hold mining contracts with the government and 76 companies hold coal contracts of work (locally known as PKP2B).

The 2009 Mineral and Coal Law mandates that all existing mining contracts have to be adjusted to the content of the law.

Energy and Mineral Resources Minister Darwin Zahedy Saleh had also requested all foreign mining companies in Indonesia to understand the government’s intent in increasing its income from the mining sector and improving the added value.

Freeport said in a press statement that in the first half of this year, the company paid US$1.4 billion in financial obligations to the Indonesian government. From 1992 to June 2011, the company contributed a total of $12.8 billion to the country.

The firm’s mine is 213,000 hectares in area. Royalty payments from the company accounted for 68 percent of Papua’s gross domestic regional product (GDRP) and 96 percent of Timika’s GDRP in 2010. During that year, the company contributed $1.9 billion to the state income from tax and non-tax payments and invested $2.1 billion.

Freeport’s contribution to Indonesia’s GDP reached 1.59 percent last year.