Government turns down Freeport?s request

The government turned down requests made by gold and copper giant PT Freeport Indonesia as conditions for agreeing to convert the company?s operating permit from contract of work (CoW) to special mining business license (IUPK).

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said on Wednesday that all mineral mining companies wishing to continue export of mineral concentrates must follow the recently-introduced new Government Regulation No 1/2017 and the implementing ministerial regulations. He said that there will be no more negotiation. ?All must follow the regulations. All are equal before the law,? he said.

The government last week introduced the new rules, which allow mineral mining companies to continue export of mineral concentrates including copper concentrates produced by companies such as PT Freeport for the next five years under certain conditions including the conversion of the miners? operating permit from CoW to IUPK, commitment to develop domestic smelters within five years, and pay export duty. The export of mineral concentrates was supposed to be banned starting January 12 of this year as stipulated under the previous regulation. The new mining rules also require miners controlled by foreign firms including PT Freeport to gradually divest up to 51 percent shares to Indonesian investors.

PT Freeport, a local subsidiary of US-based Freeport McMoRan Copper & Gold Inc, said on Sunday it was ready to convert its CoW into IUPK and is committed to build the required domestic smelter in a bid to be able to continue export of copper concentrates.

But PT Freeport Spokesman Riza Pratama said that the company wants the government to also ensure legal and fiscal certainty for the company as conditions for the conversion of the mining business permit into IUPK. PT Freeport wants a nailed down tax system, while existing regulation stipulates that miners holding the IUPK must follow prevailing regulations, not nailed-down.

Riza also said that the company needs assurance that its current mining permit, which will be converted into IUPK, to be extended until 2041 before it starts making significant investment in the planned US$2.2 billion smelter project, and multi-billion dollar underground mine in Papua. The current contract is set to expire in 2021.

There are 34 mining companies holding CoW, but so far only PT Freeport which as expressed openly its readiness to convert the permit into IUPK. (*)