Freeport agrees to reduce size of mining areas

PT Freeport Indonesia has agreed to reduce the size of its gold and copper mining areas in Timika, Papua as part of the renegotiations of its contracts with the government, Investor Daily reported on Wednesday.

Energy and Mineral Resources Ministry?s director general for mineral and coal Thamrin Sihite said last week that the American mining giant had in principle agreed to reduce the size of its mining areas.

?The renegotiation talks have showed a progress, the mining areas of Freeport will be reduced,? he said. However, no decision had so far been made on the size of areas which would be taken from the Freeport?s existing mining concession, he said.

One of the options, Thamrin said, the government would take back Freeport?s mining areas which overlap with national forest parks. ?This is important to reduce conflict on overlapping mining areas,? he said.

According to the 2009 mining law, a mining area which has begun production is limited to 25,000 hectares. At present, Freeport?s mining areas cover about 170,000 hectares. However, Thamrin said that Freeport could retain mining areas of more than 25,000 hectares if its long-term development plan approved by the government proposed an area of more than 25,000 hectares.

In addition to the size of the mining area, the renegotiations also include issues related to royalties and the length of the contract. ?Royalty and the length of the contract is for example interrelated,? he said.

Freeport?s President Director Rozik B Soetjipto earlier said that the company agreed to renegotiate the contract with the government. The company had stated its positions on the six clauses in the contract which were currently under renegotiations.

The six issues being renegotiated include royalty, size of mining areas, state revenues, service, domestic smelting facilities.

Rozik said that the mining area of Freeport would be probably reduced to 100,000 hectares from 170,000 hectares at present.(*)