Freeport prefers mandatory divestment via IPO

Gold and copper giant PT Freeport Indonesia said it preferred to divest its 10.64 percent stake via initial public offering (IPO) mechanism to help ensure transparency and accountability, Bisnis Indonesia reported on Monday.

?We prefer IPO because it?s more transparent and accountable,? PT Freeport Spokesman Riza Pratama told the paper, but quickly added that it would follow any divestment mechanism decided by the government.

PT Freeport is expected to divest another 10.64 percent stake to Indonesian investor starting this month as part of its obligation to divest up to 30 percent shares. The government of Indonesia currently holds 9.36 percent sake in the company, a subsidiary of US-based Freeport McMoRan Copper & Gold Inc.

Director General of Mineral and Coal said last week that the company is expected to start offering the 10.64 percent shares October 14 to the government. The Ministry of Energy and Mineral Resources will then have 90 days to negotiate the price offered by PT Freeport, and once concluded, the ministry will propose it to the Ministry of Finance, which will decide whether the government will acquire the stake or not, or offer it to state-owned enterprises.

According to the existing regulation, the government holds the first right in acquiring the stake to be divested by PT Freeport. Next in line is state-owned company, followed by the local Papua government, and finally Indonesian private investors.

The government is currently in the process of revising Government Regulation No 77/2014, where previous reports suggested that an IPO mechanism may be allowed.

Riza said that the company is currently in the process of making valuation of the shares. The paper said that the value of 10.64 percent share in PT Freeport was nearly US$2 billion.

The government has said that it would assign state-controlled mining firm PT Aneka Tambang Tbk (Antam) to acquire the stake.

Antam President Director Tedy Badrujaman said that if appointed by the government, his company would seek a partner in acquiring the PT Freeport shares. ?In terms of funding (for acquisition), there will be a way out,? he said, dismissing concerns over the company?s capacity in funding the acquisition. (*)