While Adkerson emphasized FCX’s willingness to compromise on Indonesia’s demand for it to sell its controlling stake in PT Freeport Indonesia (PTFI), his gesture seemed to indicate the fight to forge a permanent deal with Indonesia would be an uphill battle.

There are still three main issues that need to be resolved, namely the valuation of the shares, the Indonesian buyers of the stake and what to do about an unincorporated joint venture between FCX and Anglo-Australian miner Rio Tinto in PTFI.

This is despite the fact that Indonesian officials have been loudly claiming victory in the negotiations, giving the impression that FCX has simply conceded to the government’s demand for the company to reduce its stake in PTFI to allow national entities to own at least 51 percent.

PTFI, Indonesia’s first foreign investor and biggest taxpayer, operates the world’s largest integrated gold and copper mine in Indonesia’s poorest province, Papua, generating 98 percent of FCX’s consolidated gold sales and more than a quarter of its revenues.

At present, FCX owns 90.64 percent of PTFI, while a mere 9.36 percent is owned by the government.

“After 50 years being owned by a foreign entity, the government, under the leadership of President Joko “Jokowi” Widodo, has been able to get control of 51 percent of PTFI’s shares. What a remarkable result of negotiation,” Finance Minister Sri Mulyani Indrawati proclaimed on her Facebook account.

Energy and Mineral Resources Minister Ignasius Jonan also jumped on the bandwagon, crowing about the successful negotiations.

Both ministers have even started promoting the hashtag #FreeportTaatIndonesiaBerdaulat, or “Freeport complies, Indonesia affirms sovereignty,” through their posts on social media.

However, FCX later issued a statement insisting that a deal was far from having been agreed.

“FCX and Indonesia have reached an understanding on a framework to support PTFI’s long-term investment plans in Papua,” it said.

“FCX will agree to divest its ownership in PTFI at fair market value so that Indonesia interests own 51 percent of PTFI’s shares. The timing and process of divestment is being discussed with the government. The divestment will be structured so that FCX will retain control over operations and governance of PTFI,” FCX said.

This framework, it said, would require definitive documentation and FCX board and partner approvals.

PTFI will also convert its Contract of Work (CoW) to a special mining license (IUPK), which will provide PTFI with long-term operating rights through 2041. The company will also commit to construct a new smelter in Indonesia within five years.

The government has previously estimated FCX’s 41.64 percent stake to be divested to be worth $2.46 billion, while PTFI’s estimate is $6.6 billion, which takes into account Grasberg’s reserves.

Complicating the matter, the divestment process also concerns Rio Tinto. The world’s second-biggest miner has a stock option in PTFI under an unincorporated joint venture with FCX.

In 1996, FCX and Rio Tinto established an unincorporated joint venture, paving the way for the latter to control 40 percent in PTFI’s CoW and the option to participate in 40 percent of any other future exploration projects in Papua.

Under the agreement, Rio Tinto has a 40 percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver through 2022 in Grasberg’s Block A, and, after 2022, a 40 percent interest in all production from Block A. All of PTFI’s proven and probable reserves and all its mining operations are located in the block.

Minister Jonan has stressed that the government will reject a divestment price that included the reserves.

“It will not include reserves but be based on the business value. The reserves will still be there beyond 2041; why would they calculate something that isn’t even theirs?” he said.

The government is likely to assign a state-owned mining holding company, the formation of which is ongoing and which will comprise several state miners, to purchase the stake based on the price stated by an independent valuator.

The planned holding company will form a consortium that will include local governments to take up the stake.

“Even when the government has succeeded in acquiring 51 percent of PTFI’s shares, it will have to find ways to finance the operations of Grasberg in years to come,” Indonesian Mining Institute head Irwandy Arif said.

FCX has estimated that it will have to invest $20 billion to develop Grasberg’s underground mines by 2041, while half of the revenues might be received after 2031.

To provide certainty for PTFI’s long-term operations, Sri Mulyani has stated that her team is currently formulating a government regulation that will regulate new tax and royalty rates for all mining-permit holders, including PTFI, in a bid to generate “better state revenues” in the long run.

The regulations will be drafted in accordance with the current laws, although it will use the principle of “nail-down,” in which the taxes paid by miners will remain the same for the length of their contracts.

Since commencing operations more than five decades ago, Freeport has been synonymous domestically with gold, not copper, and is usually looked on with suspicion. Affairs related to the company have always been political, with many officials and activists berating it as a symbol of US economic imperialism in Indonesia.

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