Freeport open to possibility of discussions on contract renegotiation
Saturday, October 1 2011 - 04:06 AM WIB
?We?re open to talks on our activities, future plans and the content of the mining contract with the government of Indonesia,? company spokesperson Ramdani Sirait was quoted by The Jakarta Post as saying.
Earlier, the Minerals and Coal Directorate General at the Energy and Mineral Resources Ministry, said several issues will be discussed with Freeport in the renegotiation, including royalties, divestment, the size of the mining concession, the ban on raw material exports, the utilization of domestic services and the contract period.
Freeport?s existing contract has been implemented since December 1991 and would expire in 2021. However, the contract could be extended twice for a 10-year period each time.
Freeport has said it would honor and comply with the current contract, and that the company believed that the contract was fair to all parties and resulted in significant contributions to the government.
He revealed that some clauses in the contract had given many benefits to the government, such as the one on institution income tax payments. Despite the 2008 law on institution income tax stating that mining companies have to pay only 25 percent institution income tax on its total profits, the contract stipulates that the company must pay 35 percent.
In the first half of this year, Freeport paid US$1.4 billion in financial obligations to the Indonesian government. From 1992 to June 2011, the company has contributed a total of $12.8 billion to the country.
The firm?s mine is 213,000 hectares in area. Royalty payments from the company accounted for 68 percent of Papua?s gross domestic regional product (GDRP) and 96 percent of Timika?s GDRP in 2010. During that year, the company contributed $1.9 billion to the state income from tax and non-tax payments, and invested $2.1 billion. (*)