Government secures funds to acquire PT Freeport shares

Courtesy of Freeport

The government claims it has secured required funds, estimated at around Rp 40 trillion, to acquire shares in gold and copper giant PT Freeport Indonesia, Kontan reported on Wednesday.

The paper quoted Hadi Djurait, Special Staff for Communications to the Minister of Energy and Mineral Resources, as saying that the funds will come from state-owned pension fund companies.

?The funds are being prepared, (it will come from) state pension funds. The government will acquire the (PT Freeport) shares, not state-owned enterprise,? he told the paper, adding that the government is currently still in talks with PT Freeport over requirements for the company to be able to resume export of mineral concentrates and over the company?s mandatory divestment obligation.

According to Government Regulation No 1/2017, foreign-controlled mining firms such as PT Freeport, which is controlled by US-based Freeport McMoRan Inc, are required to divest up to 51 percent of their shares to Indonesian investors after 10 years of production. The central government holds the top priority in acquiring the shares followed by other domestic investors including regional governments, state-owned enterprises, regional government-owned enterprises, and Indonesian companies.

The government currently owns 9.36 percent stake in PT Freeport, which means that the company is required to divest another 40.64 percent shares, the value of which are estimated by the government at around US$3 billion, or about Rp 40 trillion.

Among of the top state pension funds include the pension fund of PT Telkom, PT Pertamina, PT PLN, PT BRI, and PT BNI. Meanwhile, Chairman of the Indonesia Pension Funds Association, Mudjiharno Sudjono said he was unaware that state pension funds will allocate funds to acquire the PT Freeport shares. But he said that the pension funds would be willing to allocate the funds if there?s instruction from the government and it?s profitable to invest.

PT Freeport, which operates the giant Grasberg mine in Papua Province, has recently been locked in a dispute with the government over the new Government Regulation No 1/2017, which among others requires the company to convert its mining permit status from the current mining contract of work (COW) to special mining business license (or IUPK) to be able to resume export of copper concentrates, which has been banned since January 12. While the company agrees to convert its COW into IUPK, the company demands the IUPK to have similar legal and fiscal terms as set in the COW, a request denied by the government. The company, which is also required to build domestic smelter, has threatened to go to international arbitration if both sides fail to reach a win-win solution within 120 days.

According to reports, PT Freeport has started suspending some workers as it has drastically scaled down mining operations due to inability to make export. (*)