F

inance Minister Agus Martowardojo says that the government is not interested in acquiring any more shares in PT Freeport Indonesia and encourages the company to launch an initial public offering (IPO), thereby ensuring greater transparency.

“I do not see any urgency for the government to buy shares. The government will instead push the general public to buy the shares once they are offered,” Agus told reporters here Thursday.

Agus said the company’s plan to float its shares on the Indonesia Stock Exchange would allow greater public scrutiny of the company’s mining operations. Freeport operates the Grasberg mine on Papua that holds the largest gold reserves and is the third-largest copper mine in the world.

“The IPO plan shows the company’s strong commitment as a large cooperation using our natural resources, to become a transparent public company,” he said.

Golkar Party legislator Harry Azhar Azis said that the finance minister’s statement went against the demand for the government to control a bigger share in the copper and gold producing company.

Harry said Agus’ statement showed that the government had failed to formulate a credible approach in the management of the mining industry. He specifically highlighted the government’s double standard.

“Newmont is also a mining company so why did the government insist on buying its shares? Why the different treatment?” Harry said, referring to copper and gold producer PT Newmont Nusa Tenggara.

The Finance Ministry purchased a 7 percent stake in Newmont through the State Investment Agency (PIP) in May last year. The House of Representatives deemed the move illegal without its approval.

Based on a contract signed by Freeport’s parent company, Freeport-McMoran Copper & Gold Inc. (FMCG), with the Indonesian government in 1967, the company is required to divest its stake in Freeport to the government or to local firms.

The contract does not specify a set percentage of shares to be divested. However, under another contract that was signed in 1991, FMCG was required to give up a 51 percent stake in Freeport Indonesia by Dec. 30, 2012.

The 1991 contract was annulled by a 1994 regulation, which effectively allowed FMCG to retain full ownership of the subsidiary.

A process to renegotiate contract terms is currently underway between FMCG and a team of government officials led by Coordinating Economic Minister Hatta Rajasa. The renegotiation focuses on six points: share divestment, the size of mining areas, contract extensions, the amount of royalties to be paid, obligations to process raw materials in Indonesia and the utilization of local goods and services.

Freeport president director Rozik B. Soetjipto recently revealed that the parent company was considering an IPO as an option to meet the demand for divestment. The company also offered 9.36 percent of shares to the regional government.

Shares in Freeport are controlled by the central government with a 9.36 percent stake, PT Indocopper Investama with 9.36 percent, and the remaining by FMCG. Indocopper is wholly owned by FMCG.