Govt asks Freeport to divest shares to local firms

Minister of Energy and Mineral Resources Purnomo Yusgiantoro has asked the management of PT Freeport Indonesia to divest part of the gold and copper giant to national firms, Koran Tempo reported Wednesday.

The minister said that Freeport’s majority shareholders should divest part of their ownership to local companies even though the company’s contract of works did not require the mining company to do so.

Purnomo made the statement when he was asked to comment about the merger of Freeport with Indocopper, which was previously owned by former president Soeharto’s close friend Bob Hasan. “The merger plan has caused a dilemma to the government because it is against the divestment principle,” he said.

Freeport Indonesia is 81.28 percent owned by the US-based Freeport McMoRan, 9.36 percent by the government and another 9.36 percent by Indocopper. The merger plan was made after Freeport McMoRan took over the entire stake of Indocopper from Bob Hasan. After the merger, Freeport McMoRan’s ownership in Freeport Indonesia will be increased to 90.64 percent.

Freeport’s spokesman Siddharta Moersjid said that the government had yet imposed any requirements on Freeport to divest its shares. “But we have to abide by the contract of works and existing regulation,” he said.

Unlike several other mining companies, Freeport is not obliged to carry out divestment program, because the extension of the company’s contract of work was made after the issuance of the government’s regulation No. 20, 1994 which allows foreign investors to have 100 percent stake. (*)