Freeport seeks clarity ahead of $17b expansion
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Indonesia’s biggest copper and gold miner, PT Freeport Indonesia, is currently waiting for clarity from the government in relation to a contract extension for its operations at the Grasberg mine in Timika, Papua, a spokesman has said.
Ramdani Sirait told reporters in a discussion in Jakarta on Thursday that Freeport Indonesia, whose parent company is US-based Freeport McMoran Copper & Gold Inc, needed “assurance” from the government regarding its contract extension.
Freeport’s current contract, which is its second Contract of Work (CoW), was signed in 1991 and is set to expire in 2021. However, the agreement stipulates that there is an option for the mining industry’s largest taxpayer to extend its contract until 2041.
“Freeport Indonesia is planning to invest US$17 billion for the 2012-2041 period, but we need clarity before we can spend the money,” he said, adding that Freeport “is ready to sit together with the government in order to discuss the amendment of the contract.”
He added that there were six main issues to be discussed in the renegotiation, namely contract extensions, the size of mining areas, the amount of royalties to be paid, obligations to process raw materials in Indonesia, the utilization of local goods and services and divestment.
Commenting on the issue of Freeport’s mining areas, the spokesman said the mining corporation was all set to shrink its 202,950 hectares of land for exploration and production. The 2009 Minerals and Coal Mining Law demands all CoW holders to apply for a mining permit when their contract expires. Under mining permit regulations, the maximum land use right must not exceed 25,000 hectares. If Freeport is unable to secure a contract extension and exemption from the mining permit requirement, the company is expected to create subsidiaries to meet production necessity and legal requirements.
Furthermore, Ramdani said that Freeport Indonesia was also exploring possibilities to become a partner of two smelter companies, PT Indosmelt and PT Nusantara Smelting, which were planning to build two copper smelters in Indonesia.
Currently, Indonesia has only one copper smelter, which is operated by PT Gresik Smelter and owned by a variety stakeholders in the mining sector. Japan-based Mitsubishi Materials Corporation owns a 60.5 percent stake, along with Nippon Mining and Metals Co. Ltd. (5 percent), Mitsubishi Corporation Unimetal Ltd. (9.5 percent) and Freeport (25 percent).
In addition, Ramdani said Freeport Indonesia was already contributing $700 million, 40 percent of its $2 billion in total spending over the last five years, on consuming local goods and services, adding that the figure still “could be
Regarding the company’s plan to put forward an initial public offering (IPO), Ramdani said that the discourse was still in the consideration of the Freeport-McMoran, adding that it remained “one possible option” for the US-based company.
He reiterated that Freeport-McMoran had offered a 9.36 percent stake to the government in the interest of promoting Indonesian ownership in the company.
“The government has diverted the offer to the regional administration, which has already shown interest in taking the bid … Still, the final decision will be in their [parent company Freeport-McMoran] hands. I cannot give you more information on that matter,” he said, declining to comment further.
Separately, newly appointed Deputy Energy and Mineral Resources Minister Rudi Rubiandini told The Jakarta Post that the government had yet sit down with Freeport Indonesia’s representatives to discuss the contract’s renegotiation.
“We are still in the process of collecting more data and information,” he said. (asa)