Freeport agrees to divest 30% stake

Gold and copper giant PT Freeport Indonesia has finally agreed to divest 30 percent stake to Indonesian investors, paving the way for concluding the protracted mining contract renegotiation between the company and the government.

Kontan quoted Director General of Mineral and Coal, R. Sukhyar as saying Friday that the agreement was reached following intensive talks over the past few days between the government and company President Director Rozik B. Soetjipto and visiting CEO of Freeport McMoRan Copper & Gold Inc, the parent of Freeport Indonesia, Richard C. Adkerson.

The divestment obligation has been the toughest issue in the renegotiation talks between the company and the government. Existing regulation actually requires foreign miners to divest up 51 percent stake to local investors, but considering that Freeport is planning to develop underground mine which requires huge investment, the government cut down the divestment obligation to 30 percent. Freeport initially insisted that it was only willing to divest 20 percent stake.

According to Sukhyar, under the new arrangement, Freeport will divest 20 percent stake in the first stage after the firm signs a new contract, or after 2021. Afterward, the company will gradually divest the remaining 10 percent.

The government said earlier that concluding the mining contract renegotiation forms part of the requirements for the company to obtain export approval. The company has not been able to export copper concentrates since the government introduced tighter export requirements in January of this year.

To meet the requirements, Freeport Indonesia has agreed to build domestic smelter in Gresik, East Java, and put down a required deposit in government escrow account. The Ministry of Finance is expected to soon issue a new regulation relaxing the punitive export tax on mineral concentrates as requested by Freeport and other miners. (*)