Government set to sign IUPK for PT Freeport

The government is set to issue a special mining business license (IUPK) for gold and copper giant PT Freeport Indonesia, a key requirement for the company to be able to resume export of mineral concentrates, Bisnis Indonesia reported on Friday.

?I will sign the IUPK tomorrow. So it?s settled,? Minister of Energy and Mineral Resources Ignasius Jonan told the paper on Thursday on the sidelines of the National Press Day in Ambon, Maluku, but did not provide further details.

The government has recently introduce a new regulation allowing mining companies to continue export of mineral concentrates for the next five years, but under certain conditions including requirement for miners to convert their mining permit status from contract of work (COW) into IUPK, and commitment to build domestic smelters within five years.

PT Freeport, whose export of concentrates has been suspended since January 12 of this year, has said it was willing to convert its mining permit status from COW to IUPK but insists that the new license contains the same legal and fiscal certainty as in COW. This means, for example, the tax rate must be nailed down is in the COW, instead of based on prevailing regulations under an IUPK license.

PT Freeport Spokesman Riza Pratama said that his company has yet to obtain information regarding the IUPK. ?What will be the form of IUPK, the government has yet to inform (us). We?re committed, but with certain conditions,? he told the paper.

He reiterated that PT Freeport wants nailed down legal and taxation aspects to provide guarantee for its long term investment.

As has been previously reported, PT Freeport Indonesia (PT-FI), a subsidiary of US-based Freeport McMorRan Inc, will be forced to start cutting down production and employment if it fails to export its copper concentrates as only about 40 percent its concentrates output can be absorbed by PT Smelting, which operates the only copper smelter in the country.

?A continuing delay in obtaining rights to export its copper concentrates will require PT-FI to undertake near-term actions to reduce production to match available domestic capacity at PT Smelting, which processes approximately 40 percent of PT-FI?s concentrate production. Under the reduced operating plans, PT-FI will be required to significantly adjust its cost structure, reduce its work force and spending with local suppliers, and suspend investments on its underground development projects and new smelter. For each month of delay in obtaining approval to export, PT-FI?s share of production is projected to be reduced by approximately 70 million pounds of copper and 70 thousand ounces of gold,? Freeport McMoRan said in a recent statement.

Vice Minister of Energy and Mineral Resources Arcandra Tahar said previously that while the government was seeking ?alternative options? to allow miners including PT Freeport to resume mineral concentrates. (*)