Operational activities take place at the PT Freeport Indonesia mine in Timika, Papua, on Saturday (12/5/2012). The government finally issued a raw mineral export ban on Jan. 12, 2014, marking a new era for raw mineral exploitation and the mining industry, moving toward developing the downstream domestic industry.
The mining license agreement between the Indonesian government and PT Freeport Indonesia has attracted attention because it determines future direction.
We have been following developments in mining license issues since the issuance of Energy and Mineral Resources Ministry Regulation No. 1/2014, which came into effect on Jan. 12 and only allows exports of processed and refined minerals from the country.
Mining companies, including PT Freeport Indonesia, have been affected by this regulation. The government provided a solution by issuing Government Regulation No. 1/2017, which came into effect on Jan. 11.
The regulation enables Freeport Indonesia to export copper concentrate over the next five years provided it changes its status from operating under a Contract of Work to a special mining license and commits to building a smelter, divesting at least 51 percent of the company within the next 10 years and follows existing tax regulations. The divestment portion has risen from the previous 30 percent. Currently Freeport Indonesia has sold just 9.36 percent of its stake.
Freeport Indonesia has not agreed with the new divestment and taxation provisions. In a press statement yesterday, Freeport Indonesia mentioned that the government was demanding Freeport end its 1991 Contract of Work and replace it with an uncertain operation license and short-term export agreement. The government will allow exports of 1.1 million tons of concentrate between January 2017 and February 2018 provided Freeport abides by the requirements in the government regulation.
Freeport said it could not release the legal rights granted to the company in its Contract of Work and would seek arbitration and compensation if the dispute with the government could not be resolved. We support the government\'s desire for Freeport Indonesia to divest 51 percent of its stake in the company that has operated in Papua since 1967. However, we also need to understand that Freeport, which has invested US$12 billion and is investing another Rp 15 billion to develop underground reserves, is reasonable in asking for certainty to protect its long-term investment.
We hope that the dispute between the government and Freeport can reach a meeting point that equally benefits both sides. This dispute deals with the perception of business certainty in Indonesia, especially for long-term investments of a high value.
Indonesia can win this dispute if it finally goes to arbitration. However, what is more fundamental is the guarantee of respect for agreed-upon contracts. This dispute, and several other disputes that have gone to international arbitration, invite us to have a vision of prosperity for the Indonesian people that is not tainted by individual or group interests.
