Freeport hopes to soon conclude negotiation with government

By Thomas Sembiring

Gold and copper giant PT Freeport Indonesia (PTFI) hopes to be able to soon conclude ongoing negotiations with the government over its mining operations in Papua.

?We remain optimistic that the negotiations can be concluded soon,? said PTFI Spokesman Riza Pratama to Petromindo.com last week, but did not say when exactly it would be concluded.

Secretary General of the Ministry of Energy and Mineral Resources, Teguh Pamudji, who is the leader of the government team in negotiation with PTFI, said on July 10 that the negotiation was expected to be concluded at the end of July, sooner than the initial deadline of October.

PTFI, a subsidiary of US-based Freeport McMoRan Inc, has been engaged in negotiations with the Indonesian government since April amid dispute over a new government regulation introduced in January of this year, which requires mineral mining companies including PT Freeport to meet certain conditions to be able to continue export of mineral concentrates. The conditions include requirement for the miners to convert its mining permit status from contract of work (COW) to special mining business license (IUPK). While PT Freeport initially agreed to convert into IUPK the company demanded the IUPK to have similar fiscal and legal terms such as set out in the COW to help ensure investment stability as the gold and copper giant plans to make multibillion dollar investment at its Grasberg mine in Papua and to develop domestic copper smelter. With regards to tax, for instance, the company wants to maintain the nailed-down tax system as applied in the COW, a request which has been turned down by the government arguing that according to the law, the IUPK applies a prevailing tax system, which changes over time, not a nailed-down system. The government has also required PTFI to build domestic smelter as part of conditions for continuing export. The company is also required to divest up to 51 percent stake to Indonesian investors.

PTFI has demanded for an extension of its current mining contract, which is set to expire in 2021, to 2041. The government has said that based on existing regulation, the contract can only be extended for 10 years (until 2031), and that request for a second extension of another 10 years can only be made in the future. The company needs certainty for the extension of its contract until 2041 as it plans huge investment in underground mine and smelter project.

Riza said that negotiation over the company?s request for an extension of the mining contract until 2041 is still in progress. ?It?s still under negotiation. We hope to be granted for an extension until 2041,? he said.

Editing by Reiner Simanjuntak