The Jakarta Post
In a move that is likely to reduce tensions over its future operations, major mining company PT Freeport Indonesia has agreed to convert its contract, paving the way to a resolution in its prolonged dispute with the government.
Energy and Mineral Resources Minister Ignasius Jonan claims that in a change to months of resistance, Freeport Indonesia, a subsidiary of United Statesbased gold and copper mining giant Freeport-McMoRan (FCX), has agreed to allow its contract of work (CoW) to be converted into a special mining permit (IUPK).
“In principle, they have already agreed to convert to an IUPK. Hopefully, they do not change their mind,” Jonan said during a hearing with House of Representatives Commission VII on Thursday.
The conflict between the two parties built up after the mineral export ban took effect in mid-January in compliance with Government Regulation (PP) No. 1/2017.
Freeport Indonesia, the operator of the world’s largest gold and second-largest copper mine in Grasberg, Papua, is required to divest 51 percent of its shares, build a smelter within five years and convert its contract in exchange for a permit to export copper concentrate.
Freeport Indonesia spokesman Riza Pratama separately confirmed that the firm had agreed to convert its CoW into an IUPK, though it was still negotiating the terms with the government.
“Freeport Indonesia is willing to convert its CoW to an IUPK so long as it is granted investment stability, entailing legal and fiscal certainty, equal to the certainties outlined in our [current] CoW,” he told The Jakarta Post.
Although Riza declined to disclose its proposed terms, Jonan revealed that the firm had asked to pay the fixed tax as stipulated in its CoW although it is higher than the prevailing tax. Furthermore, it also wants to continue talks on levies imposed in Papua, he added.
The firm’s acquiescence marks a milestone after weeks of tough negotiations to settle the dispute out of court after both Freeport and the government have pledged to bring the dispute to the United Nation’s arbitration tribunal.
The progress in the negotiations comes just before US Vice President Mike Pence’s visit to Indonesia next month. Indonesian officials have said the Freeport dispute is likely to be high on the vice president’s agenda
FCX is known to be politically connected as US billionaire Carl Icahn, special adviser on regulatory reform to US President Donald Trump, is the third major FCX shareholder.
Previously, with strong support from its parent company, Freeport Indonesia had consistently rejected the government’s requirements, which the company argued had violated the investment certainty provided by the present CoW dating back to 1991.
As a result of the standstill, the miner had been unable to sell its copper concentrates overseas, leading to a large pile up that put a brake on its mining operations.
Earlier this month, Freeport Indonesia, Indonesia’s biggest oldest foreign investor, resumed production at 40 percent of its normal rate after securing an export permit for anode slime, a byproduct of copper processing.
During the hearing, Jonan also told legislators that the government might allow the miner to ship its copper concentrate while negotiations on the other terms continued so long as the latter officially agreed to the contract conversion.
“As they have technically agreed to an IUPK, they will be able to export so long as they submit a proposal to build a smelter within the next five years following government regulation [PP] No. 1/2017. The government must be firm [in this case]. The company must own an IUPK,” Jonan said.
House Commission VII, meanwhile, called on the central government to seek input from the Papuan people before making any future policy about the miner.
“We ask the energy and mineral resources minister to involve Papuan locals in any decision-making process pertaining to Freeport Indonesia in order to comply with the Regional Autonomy Law,” chairman Gus Irawan Pasaribu said.
Separately, a coalition of civil societies officially submitted a proposal to the Supreme Court to review PP No. 1/2017 and its subsequent regulations, claiming that they violated the 2009 Mining Law and offered excessive leeway for miners to continue selling raw and semi-processed minerals abroad.
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