Activities in an underground mine of PT Freeport Indonesia in Tembagapura, Mimika, Papua, Friday (16/7). PT Freeport has invested US$4 billion in the underground mine and will invest another US$15 billion if its contract extension is approved by the government.
JAKARTA, KOMPAS — The government of Indonesia and PT Freeport Indonesia have yet to reach an agreement on the value of shares in the company to be divested. The government and Freeport recently agreed to form an independent team to determine the value of the shares.
Energy and Mineral Resources Ministry secretary-general M. Teguh Pamudji said there had been progress in the deliberation of four major issues between the government and Freeport Indonesia. The four issues are smelter development, extension of operation, tax and share divestment. However, there has been no final agreement on the value of shares to be divested.
“Regarding operation extension, it has been agreed that the next extension will be for 10 years or until 2031. It is with the prerequisite that they have to propose an extension and get approval from the government. It is the authority of the government to approve it or not,” Teguh said during a press conference on Wednesday (26/7) in Jakarta.
Regarding tax, Teguh said the government was preparing a legal basis in the form of a government regulation (PP) on the taxation of special mining permit holder (IUPK) and coal mining contract (PKP2B). The regulation is aimed at avoiding double taxation by the central government and the regional administration.
Contacted separately, Centre for Indonesian Resources Strategic Studies director Budi Santoso said the government must be careful in setting the price of Freeport shares to be divested. The government should estimate the value of Freeport shares to be divested using the price at the end of the contract in 2021 and not at the end of the contract after extension.
“Divestment is an important part of the extension. The calculation of share value is based on the ongoing permit. That means, if divestment takes place before the operation extension, then the government’s divestment rights will be only until 2021. It must be careful in this,” Budi said.
Inseparable
In responding to the government, Freeport Indonesia vice president of corporate communication Riza Pratama said the company was studying the percentage of shares to be divested and their value. According to him, the four issues on the table in negotiations with the government were inseparable.
Previously, Freeport included the mineral reserves in its operational area on the assumption that its operational extension would be until 2041. The government, meanwhile, considers Freeport’s operation period to be only until 2021. In 2015, Freeport offered 10.64 percent of its stakes to the Indonesian government at US$1.7 billion (equal to Rp 22.6 trillion at Rp 13,300 per US dollar). Meanwhile, according to the government’s calculation at that time, the value of the shares was around $600 million, less than half the amount asked for by Freeport.
After 50 years of Freeport\'s operation in Papua, the Indonesian government’s share in the gold, copper and silver mining company is 9.36 percent. Based on Government Regulation No.1/2017, Freeport is obliged to release at least 51 percent of its shares to the central government, regional administration, state-owned companies, region-owned firms and national private companies.
