Government to allocate 5-10% shares in PT Freeport for Papua

Petromindo|Thomas

Minister of Energy and Mineral Resources Ignasius Jonan said that the government will allocate around 5-10 percentage point shares in gold and copper giant PT Freeport Indonesia for the Papua provincial and Timika regency administrations where the company operates.

Jonan revealed the plan on Monday during a meeting with a number of representatives of Papua tribal groups at the ministry, where he also said that the next round of negotiations between the government and PT Freeport, particularly regarding the company?s mandatory divestment program, can be participated by the local administrations and representatives of Papua tribal groups.

?The Papua provincial and Timika regency administrations will be invited to discuss the PT Freeport Indonesia 51 percent share divestment ? This is still being negotiated whether (to allocate) 5 percent or 10 percent (shares) for Papua and Timika. But in principle, they will be invited to the negotiation,? he said in a statement issued by the ministry.

PT Freeport, a local subsidiary of US Freeport McMoRan Inc, late last month agreed to divest up to 51 percent shares to Indonesian investors as part of concessions for the company to be allowed to continue its mining operations beyond 2021, when its current contract expires. Details of the divestment including price and the timing, however, has yet to be concluded.

The government, which has demanded for a fair market value of the PT Freeport shares, wants a consortium of state-owned and Papua administration-owned companies to acquire the PT Freeport shares. The government currently holds a 9.36 percent interest in PT Freeport, which means that Freeport will have to divest another 41.64 percent.

The government has previously estimated the 41.64 percent shares of PT Freeport at US$2.46 billion, while the company?s estimate was $6.6 billion, taking into account the reserves at the Grasberg mine in Papua. Jonan said that the share valuation must not include the Grasberg reserves.

The government and PT Freeport have been engaged in negotiations since the past four months to help resolve disputes following the introduction of new regulations earlier this year. The government expects the negotiations to be concluded in October.

Editing by Reiner Simanjuntak