The Jakarta Post
Indonesia’s biggest copper and gold miner, PT Freeport Indonesia, says an initial public offering (IPO) would be the last divestment option as the company prioritizes the ongoing negotiation for share acquisition by the Indonesian government.
“The government is still our priority. We want the involvement of both the central and regional governments inside Freeport’s management,” Freeport Indonesia spokesperson Ramdhani Sirait told reporters on Friday.
Ramdhani said Freeport Indonesia’s parent company, US-based Freeport McMoran Copper & Gold Inc., had made an offer of diluting its ownership by 9.36 percent for the interest of allowing more Indonesian ownership in the company, particularly that of the regional government.
The 9.36 percent ownership, he said, was offered to the regional government of Papua so as to allow direct involvement of both the central and regional governments and to improve transparency.
Ramdhani said the monetary value of the offered stake would be valued accordingly to the valuation of Freeport-McMoran listed shares in the New York Stock Exchange (NYSE).
Freeport Indonesia operates the Grasberg mine on Papua that holds the largest gold reserves and the second-largest copper mine in the world. The company is currently 81.28 percent controlled by Freeport McMoran, 9.36 percent by the Indonesian central government, and 9.36 percent by PT Indocopper Investama, which is entirely owned by the US company.
Unlike other foreign-owned mining companies, Freeport is exempted from an obligation to divest 51 percent of its stake to local investors, be that the government or the private sector, as required by the 2009 Minerals and Coal Mining Law.
According to Freeport-McMoran’s initial Contract of Work (CoW) with the government signed in 1967, the firm is required to divest its stake in Freeport Indonesia to the government or to local firms. The contract does not specify a set percentage of shares to be divested. However, under the company’s 1991 contract with the government, it was required to give up a 51 percent stake in Freeport Indonesia by Dec. 30, 2012.
The 1991 contract was nullified by a 1994 government regulation, which effectively allowed Freeport-McMoran to retain full ownership of the subsidiary.
Under a government regulation issued in April this year, mining companies operating in Indonesia under CoW would have to convert its operating license in to a mining permit, or locally known as IUP, when their contract expire. The request for IUP must be submitted no later than six months prior to the expiry of the CoW. Freeport’s contract will expire in 2021.
Separately on Friday, Freeport Indonesia president director Rozik B Soetjipto confirmed the company was in negotiation with the government. The points of negotiations, he said, include: certainty for the extension of contract, the size of mining areas, revision to the amount of royalty paid to the government, obligations to process raw material in Indonesia, the utilization of local goods and services, as well as the divestment
The government previously said that a team led by Coordinating Economic Minister Hatta Rajasa had been set up for the negotiation with Freeport. The team’s working period will end in 2013.
The government wants state owned mining companies, PT Aneka Tambang and PT Bukit Asam, to take part in the acquisition of shares in Freeport Indonesia.
Shares in Freeport McMoran was closed at US$35.47 a piece at the NYSE on Thursday, up by 0.7 percent compared to Tuesday closing.
The stock market closed on Wednesday for national holiday.