Government hopes to conclude negotiation with Freeport end July
Monday, July 10 2017 - 01:29 PM WIB
Petromindo|Lucky
The Ministry of Energy and Mineral Resources hopes to conclude ongoing negotiations with gold and copper giant PT Freeport Indonesia by the end of July, sooner than the October deadline.
?Actually, the target (to conclude the negotiation) is in October. But Minister of Energy and Mineral Resources Ignasius Jonan earlier agreed during coordination meeting at the Ministry of Finance to be end of July,? said Secretary General of the Ministry of Energy and Mineral Resources, Teguh Pamudji, who is also the leader of the government?s team in the negotiation with PT Freeport, on Monday.
He said that the final results of the negotiations will be informed directly to Richard Adkerson, CEO of US-based Freeport McMoRan Inc, the parent of PT Freeport.
PT Freeport 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.
Teguh said that as a middle way, the government is considering to apply so-called ?prevailing lock? scheme, which means that the taxes imposed on the company will change over time but that the changes will be disclose ahead so as to allow the mining firm to make calculation in running its operations. This is meant for the state to obtain better revenue from PT Freeport operations.
Other issues being discussed in the negotiations include the requirement for PT Freeport to divest up to 51 percent shares to Indonesian investors, the requirement for PT Freeport to develop domestic smelter, and a request by the company to obtain certainty for extension of its current mining contract, which is set to expire in 2021, until 2041.
Teguh said that the government can?t approve the request for the current PT Freeport contract to be immediately extended until 2041. He said that the government agrees to first extend the contract for 10 years until 2031. The government will only give second extension of another 10 years until 2041 once PT Freeport has met certain requirements. (*)