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Jakarta Post

No extension for Freeport just yet

The government has yet to issue a permit extension to allow PT Freeport Indonesia to continue exporting mineral concentrate past the permit’s expiration on Monday

Fedina S. Sundaryani (The Jakarta Post)
Jakarta
Tue, August 9, 2016

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No extension for Freeport just yet

The government has yet to issue a permit extension to allow PT Freeport Indonesia to continue exporting mineral concentrate past the permit’s expiration on Monday.

The issue of whether or not Freeport Indonesia, which is 90.64 percent owned by US-based Freeport-McMoran Inc., will be granted an extension has been closely observed, as a ban on exporting mineral extracts is set to be implemented in Jan. 2017.

The Energy and Mineral Resources Ministry’s mineral and coal director general Bambang Gatot Ariyono said on Monday evening that it was still evaluating Freeport Indonesia’s proposal. Even if such an extension was granted, it would only be valid until January.

Last month, Freeport Indonesia submitted a request for a six-month extension with an export quota of 1.42 million tons, a 37.86 percent increase from the previous quota.

Since the ratification of the 2009 Mining Law, mining companies have been allowed to export raw minerals for six months at a time, based on a ministerial regulation issued in 2015.

The exports are expected to stop in January following the implementation of the ban, which the government issued in a bid to encourage the development of downstream industries in the mining sector through the construction of smelters.

Freeport Indonesia spokesman Riza Pratama said the company was hopeful that the government would allow it to export for an additional six months. “We are hoping that the government will issue the export permit as soon as possible,” he said.

House of Representatives Commission VII legislator Satya W. Yudha claimed that by extending the mineral concentrate export permit the government was violating existing regulations, because the Mining Law itself stipulates that the ban starts in 2015.

The implementation of the export ban was pushed back to Jan. 11, 2017, through a ministerial regulation amid pressure from the mining industry.

Satya, a Golkar Party politician, suggested that the government immediately issue a regulation in lieu of law to last for six months to a year, to ensure the extension complied with the Mining law and to give lawmakers time to revise the law.

“There needs to be a legitimate legal [basis for the regulation], or smelter businesses will be confused. They will want to invest; extension after extension will only create uncertainty,” he said.

Satya acknowledged that the government was in a tight spot since global commodity prices remained low. Slashing exports could jeopardize state revenues, and there is no clear schedule yet for the construction of Freeport Indonesia’s required smelter.

The export extension is not the only issue the government must tackle. Freeport Indonesia is obliged to divest 30 percent of its shares to Indonesian shareholders in the renegotiations of its operating contract, which expires in 2021.

Freeport Indonesia has already offered the government a 10.46 percent stake in the Grasberg mining site for US$1.7 billion. However, the government said the price was too high.

Satya criticized the divestment process, as Freeport Indonesia’s offer was based on the assumption that its contract would be extended to 2041, whereas the company could only propose a working contract extension in 2019.

ReforMiner Institute executive director Komaidi Notonegoro said integration in upstream and downstream sectors of the mining industry had not been realized as planned.

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