Freeport hopes to reach agreement with government, avoid arbitration

Courtesy of Freeport

Gold and copper giant PT Freeport Indonesia hopes to be able to reach a win-win solution with the government over mining contract dispute and avoid arbitration.

Wahyu Sunyoto, Senior Vice President for Geo Engineering at PT Freeport said that the company wants to quickly settle the current dispute with the government to be able to resume export of copper concentrates and production activity at its underground mine operation in Papua.

Speaking at a discussion forum on Monday, Wahyu said that the company applied a block caving method at the underground mine, which requires production activity to be continued to maintain the underground tunnel. Without proper maintenance, the underground tunnel could collapse.

?As a geologist, I hope there won?t be arbitration,? he said, adding that the ongoing negotiation between the company and the government is expected to come up with a win-win solution within six months as targeted by the government.

PT Freeport, a local subsidiary of US-based Freeport McMoRan International, has been engaged in dispute with the government following the introduction of a new mining regulation in January of this year. The new policy allows miners to continue export of mineral concentrates for another five years including copper concentrates produced by firms such as PT Freeport under certain conditions including the conversion of their mining permit status from mining contract of work (COW) into special mining business license (or IUPK), commitment to develop domestic smelter, pay export duty, and requirement for foreign controlled mining firms to divest up to 51 percent shares to Indonesian investors.

While PT Freeport has agreed to convert the COW into IUPK, the company demanded for fiscal and legal terms in the IUPK similar to those set under the COW regime including a nailed down tax system, instead of tax system based on prevailing regulation. The request has been turned down by the government. The company said that if no solution is reached, it would be forced to go to international arbitration to settle the dispute. PT Freeport has been unable to export copper concentrates since January 12 due to the dispute.

The government and PT Freeport have recently started negotiation, hoping a win-win solution could be reached within six months. Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources Bambang Gatot Ariyono was quoted by Kontan as saying Tuesday that both sides have yet to reach agreement, but talks are still continuing. ?Every Tuesday we have meeting with Freeport,? he said, adding that the government has no plan to issue a temporary IUPK for PT Freeport to allow the company to resume export. (*)