JAKARTA, KOMPAS – Negotiations between the Indonesian government and mining giant PT Freeport Indonesia have entered a new round.
The US-based mining company, which operates a gold and copper mine in Papua, has complied with the government’s terms, such as divesting 51 percent shares, building a smelter, and following existing taxation schemes. However, further negotiations are still needed to realize a more detailed agreement, a joint press conference disclosed in Jakarta on Tuesday (29/8).
Attending the press conference were Energy and Mineral Resources Minister Ignasius Jonan, Finance Minister Sri Mulyani Indrawati, and President and CEO of Freeport-McMoran Inc, the holding company of PT Freeport Indonesia, Richard C Adkerson.
At the press conference, Adkerson said that the 51 percent share divestment and the construction of a smelter were the main terms that Freeport had agreed to in the negotiations. In order to achieve these goals, Freeport was willing to cooperate with the government.
Currently, the government owns a 9.36 percent stake in PT Freeport Indonesia.
"We have agreed to increase the Indonesian ownership to 51 percent over time in a way that compensates fair market value. We still have work to do to reach the compromise," he said.
Adkerson also said that Freeport also agreed to pay a larger royalty in accordance with existing regulations. The company has also agreed to meet the government’s demand to increase the state revenue from existing terms. He said Freeport was happy and comfortable doing business here and would continue to invest in Indonesia.
Meanwhile, Jonan said that the value of the shares to be divested would be discussed further between the government and Freeport.
Regarding the extension of Freeport’s operations, he added that this would automatically be granted if the company met with several conditions, such as administrative requirements and tax compliance.
"We hope the process will be completed in the near future. There should be a guarantee to provide a climate conducive to investment. Otherwise, no one will invest here," said Jonan.
Priority
Sri Mulyani added that details related to the divestment process would also be discussed, including the institutions that will buy the shares. According to existing regulations, the central government has the priority privilege to buy the shares, followed by local government, state-owned enterprises, and then private national companies.
"Regarding the plan to raise larger state revenues, we are preparing a tool in the form of government regulations (PP)that will contain some articles on state revenues. This is not specific to Freeport alone, but will also be applied to all mining companies," said Sri Mulyani.
Over 50 years of Freeport’s operations in Papua, the Indonesian government\'s ownership in the gold, copper and silver mining company has remained only 9.36 percent.
Based on Government Regulation No. 1/2017, the fourth amendment to Government Regulation No. 23/2010 on Implementation of the Law on Mining and Coal Mining, a foreign company that operates mines under the Mining License (IUP) and the Special Mining License (IUPK) is required to divest up to 51 percent of their shares to Indonesian entities 10 years after the start of its commercial operation.
Article 97 of Government Regulation No. 1/2017 on the divestment process stipulates that the minimum 51 percent divestment should be conducted in stages and that divestment should be completed in the tenth year of the company’s operations.
Separately, speaking to reporters at his office, Vice President Jusuf Kalla said the main points of the negotiations with Freeport had not been fulfilled.
"Of the key principles conveyed to Freeport, I think almost all have been agreed. As for the divestment, technical details are under discussion,” he said.
The government, he said, would stick to PP No. 1/2017.