Govt sees lengthy Freeport contract revision

The government has indicated that the process of reviewing and possibly revising the mining contract of PT Freeport Indonesia may not be completed until next year, The Jakarta Post reported Monday.

?We are still waiting for the outcome of a special team formed by the House to review Freeport?s contract and operations, and from the Finance Ministry on royalty issues,? said Energy and Mineral Resources Minister Purnomo Yusgiantoro.

?The ministry wants to speed up the process and wrap it up as soon as possible. But we cannot do that since other institutions are also involved in the process. We hope to be able to complete it by this year, but that is unlikely to happen,? he said.

He reiterated the revisions would likely be related to securing the government a greater share of the revenue from Freeport?s mining operation in Timika, Papua, which has become a frequent target of protests from the local community and legislators.

Purnomo, however, refused to say what percentage of revenue the government was seeking.

?In the mining sector, there is no ideal figure for revenue sharing. A zero-sum game is always in play, meaning that one party should have a higher share of the revenue than the other. For sure, the revenue share we will ask for will not deter investment in the sector,? he said.

Freeport, a local unit of the world?s largest gold and copper miner, Freeport-McMoran Copper & Gold Inc, has on numerous occasions said it has lived up to all of its financial obligations to the government.

The company?s total output in 2005 was 1.46 billion pounds of copper and 2.8 million ounces of gold. It paid around US$1.2 billion in taxes to the government.

A revision of the contract is possible, Purnomo said, because one of the three requirements that allow the government to revise the contract has been met. According to Purnomo, the government can only propose a contract revision if Freeport fails to comply with its working contract, is found to have violated Indonesian law or requests a contract revision.

?I cannot specifically mention which of these conditions has been met. But there was a recent audit to verify the occurrence of certain violations that would lead to a revision,? he said.

The government also is working to improve Freeport?s community development programs, to allow people living near the mining concession to receive more benefits.

Environmentalists and politicians have urged the government to revise Freeport?s mining contract, saying the company, despite its huge annual profits, has failed to make significant contributions to the improved welfare of local tribes. They also allege massive environmental pollution at the mining site.

The Papua administration has on several occasions urged the central government and Freeport to show greater commitment to the development of the country?s easternmost province.

Freeport has been under the spotlight since early this year amid allegations that it is responsible for serious pollution in and around its mining concession, as well as for providing fees to security personnel to help guard its operations. (*)