Govt insists on replacement cost mechanism to value Freeport shares
Monday, August 29 2016 - 02:45 AM WIB
Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources Bambang Gatot Ariyono was quoted by Investor Daily as saying that existing regulation requires the government to use the replacement cost mechanism to value the shares to be divested by PT Freeport.
?Our position remains (using the replacement cost mechanism),? he said over the weekend. He did not say when the government will resume negotiation talks with PT Freeport. He added that his office has yet to discuss the issue with the newly appointed interim Minister of Energy and Mineral Resources, Luhut Panjaitan.
PT Freeport, a subsidiary of US-based Freeport McMoRan Copper & Gold plans to divest 10.64 percent shares to local investors with first priority given to the government as part of a mandatory divestment program. PT Freeport has assigned a value of US$1.7 billion for the 10.64 percent shares, much higher than the $630 million value put by the government using the replacement cost mechanism, which is based on the investment the company has spent in developing the Grasberg mine in Papua. In contrast, PT Freeport includes the mine operation until 2041 in valuing the shares.
The government sent a letter to PT Freeport in April, demanding the company to use the replacement cost mechanism in valuing the shares, but PT Freeport responded in June insisting on the market value of $1.7 billion. (*)