Govt to relax divestment obligation of foreign mining firms

In a move seen to help accelerate the ongoing protracted contract renegotiation process with gold and copper mining giant PT Freeport Indonesia, the government has agreed to relax the divestment obligation of foreign mining firms operating underground mine in the country, reports said on Tuesday.

Director General of Coal and Mineral R. Sukhyar said that under the proposed new divestment requirement, miners operating underground mine will only have to divest 30 percent of its shares to local investors, lower than the initial divestment obligation of a minimum 51 percent.

He said that the new relaxed divestment obligation, to be accommodated under the current revision of Government Regulation No 24/2012, was proposed because miners operating underground mine because they have to make huge investment to develop the mine.

The government is currently in the process of contract renegotiation with miners including PT Freeport, a local subsidiary of US-based Freeport McMoRan Copper & Gold Inc. Among of the six main points of contract renegotiation is the requirement for foreign mining firms to divest a minimum 51 percent stake to local investors. Freeport, which is seeking for an extension of existing contract for another 20 years, has opposed to the divestment obligation, reportedly agreeing to only 20 percent divestment. (*)