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Negotiations with Freeport still at impasse
After more than a week, the government and United States mining giant Freeport-McMoRan Inc
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fter more than a week, the government and United States mining giant Freeport-McMoRan Inc. (FCX) have yet to begin talks to break the deadlock that may drag both parties to settle their dispute in international arbitration.
The firm’s local subsidiary PT Freeport Indonesia, the country’s oldest foreign investor, has been in a tussle with the government as a newly passed regulation requires the conversion of a contract of work (CoW) signed in 1991 into a special mining license (IUPK) in return for an export permit extension.
According to the contract, both parties must resolve their dispute within 120 days or else the case can be settled in international arbitration. More than a week after the firm notified the government of areas of dispute, the Energy and Mineral Resources Ministry acknowledged it had yet to officially kick off negotiations with the firm.
“There have been regular meetings, but we have not started negotiations. Both parties were still composing their official positions,” the ministry’s mineral and coal director general Bambang Gatot Ariyono told reporters on Monday.
The key issues in question included foreign miners’ obligation to divest a 51-percent stake within a decade of production, the floor price for minerals and requirements for contract conversion, all ruled under the new Government Regulation No. 1/2017.
Under the CoW, Freeport was initially required to sell 51 percent of its stake to Indonesian entities by 2011, or 45 percent if it had sold a minimum 20 percent in the local stock market.
Freeport owns 90.64 percent of Freeport Indonesia, while the Indonesian government controls the remaining 9.36 percent.
The local unit recently rejected the government’s move to grant it the IUPK and export permit as it deemed the move one-sided and in violation of its CoW.
Nevertheless, the government has so far shown no signs of backing down, having gained public support with the latest coming from the Indonesian Advocates Association (Peradi).
Chairman of Peradi’s board of supervisors, Otto Hasibuan, said that Freeport Indonesia had already breached its own CoW by refusing to comply with the government’s regulations. He referred to Article 23, which states that the company will “cooperate with the government in promoting the growth and development of Indonesian economic and social structure and be subject to the provisions of this agreement at all times to comply with the laws and regulations of Indonesia from time to time in effect.”
“Based on the CoW itself, Freeport must conform to the government’s regulation [...]. This means that even though the CoW exists, it must follow any new rules introduced by the government. Does this not mean that Freeport violated [the CoW] first?” Otto said after meeting Energy and Mineral Resources Minister Ignasius Jonan.
Furthermore, Peradi requested the ministry’s permission to access certain data as the former’s Papua branch had received reports that Freeport Indonesia had broken its CoW by allegedly damaging the environment surrounding the Grasberg mine in Mimika, Papua, which, if proven, could pave the way for a civil lawsuit.
Separately, Freeport Indonesia spokesman Riza Pratama brushed off the accusations and said the firm and the government would continue to work together to seek a solution.
“We [will] continue to negotiate with the government in order to obtain a win-win solution, not to find faults in each other,” he told The Jakarta Post on Monday.
Meanwhile, representatives of Papua sought clarity from the central government over the benefits the local Papuans would reap if Freeport Indonesia agreed to divest 51 percent of its shares.
