TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Freeport CEO meets billionaire minister, but hurdles remain

Coordinating Economic Minister Chairul Tanjung said Wednesday that contract negotiations with Freeport Indonesia and issues related to the company’s commitment to build a smelter would be settled before the next government took over in October

Raras Cahyafitri (The Jakarta Post)
Jakarta
Thu, June 5, 2014

Share This Article

Change Size

Freeport CEO meets billionaire minister, but hurdles remain

C

oordinating Economic Minister Chairul Tanjung said Wednesday that contract negotiations with Freeport Indonesia and issues related to the company'€™s commitment to build a smelter would be settled before the next government took over in October.

Chairul, one of Indonesia'€™s richest men, made the statement after meeting with US-based Freeport McMoRan Copper & Gold Inc. CEO Richard Adkerson.

Elaborating, Chairul said problems hampering the negotiation process and issues related to the company'€™s construction of a smelter should soon be resolved to ensure that they would not affect Freeport'€™s operations and state revenues.

'€œWe are trying to conclude the negotiation process as soon as possible. Hopefully, before the end of the current government,'€ he said.

 It was Adkerson'€™s second meeting with top Indonesian government officials this year after a raw minerals export ban came into force on Jan. 12. Besides problems related to contract renegotiations, Freeport is now also in trouble because it has been unable to export its copper concentrate due to the ban.

Adkerson refused to make a comment after the meeting, but he looked unhappy.

Chairul said the Indonesian government and Freeport shared the same aspiration of reaching an agreement as soon as possible. '€œThere are principle agreements in several areas. However, there are also several things that need to be harmonized,'€ Chairul told reporters after the meeting.

The talks were centered on a contract renegotiation mandated under the 2009 Mining Law. The negotiations cover six points: royalty adjustment, divestment, mine size, the use of local goods and services, contract extension and the obligation of domestic processing and refining activities.

The government'€™s ban on raw ore exports, a bid to add value to its mineral resources, has been lambasted by industry players, although miners had been given four years prior to build smelters and refineries.

In the face of intense criticism, the government decided to continue allowing the export of semi-finished minerals, such as concentrates, until 2017. This relaxation of the regulation is, however, meaningless as the government imposed progressively increasing export duties of up to 60 percent on exporters of semi-finished products.

Major miners such as Freeport Indonesia and PT Newmont Nusa Tenggara have refused to pay the duties, saying additional taxes contradicted their contracts. The companies have been trying to lobby the government to change course on the issue.

As the miners halt production and exports plummet, the government has been considering cutting the duties in exchange for a commitment from the companies to build domestic processing facilities. However, any decision on new export duties is now pending the completion of the renegotiation, Chairul said.

Renegotiations with Freeport are currently stalled on the issue of the certainty of the continuation of its mining activities when the company'€™s contract of work expires in 2021, according to mineral and coal director general R. Sukhyar.

'€œWe have an understanding in principle but we need to deepen it. There is a legal matter concerning their wishes for contract extension and what is stated under our law,'€ Sukhyar told The Jakarta Post.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.