Government reiterates demand for Freeport to lower share price

The Ministry of Energy and Mineral Resources reiterated its demand for gold and copper giant PT Freeport Indonesia to lower the price of its 10.64 percent shares to be offered to Indonesian investors under a mandatory divestment program as the US$1.7 billion price tag is calculated not based on formula set under the existing Ministerial Regulation No 27/2013, Kontan reported Saturday.

The paper quoted ministry Director General of Mineral and Coal Bambang Gatot Ariyono as acknowledging that the government to date has yet to reach agreement over the share valuation with PT Freeport, and thus is seeking to meet the company to discuss the issue.

He said that the government uses the so-called replacement cost scheme in valuing the PT Freeport shares. According to this formula, the price for the 10.64 percent shares should be set at around $630 million.

In contrast, PT Freeport, a local subsidiary of US-based Freeport McMoRan Copper & Gold Inc, takes into account its operation and reserves in Papua until 2041, while its current contract will expire in 2021. The company has been seeking to extend the contract, which according to the regulation can only be made in 2019, two years before its expiry.

Elsewhere, Gatot also urged the company to respond to the government?s earlier letter, objecting to the $1.7 billion price offer.

PT Freeport Spokesman Riza Pratama was quoted by the paper as saying the company will respond to the letter in due time. (*)