Minister claims PT Freeport agrees to divest 51% shares

Petromindo|Lucky

Minister of Energy and Mineral Resources Ignasius Jonan claimed that gold and copper giant PT Freeport Indonesia has finally agreed to divest 51 percent shares to Indonesian investors.

Speaking to reporters following a meeting with President Joko Widodo on Monday, Jonan said that what needs to be discussed further is the mechanism for the divestment.

PT Freeport, a local subsidiary of US-based Freeport McMoRan Inc, has been engaged in negotiations with the government since April to settle disputes following the introduction of new government regulations earlier this year. There are four main issues being negotiated by both sides including the mandatory 51 percent divestment, requirement to develop domestic smelter, fiscal issue, and extension of the company?s current contract, which is set to expire in 2021.

Jonan also claimed the only remaining issue that has yet to be resolved is regarding the fiscal issue, in particular regarding taxation and regional levies, which is the authority of the Ministry of Finance. He expected the negotiations with PT Freeport could be concluded this month, sooner than the initial deadline of October.

Under a new government regulation introduced earlier this year, mining firms are required to convert their current mining contract of work (COW) status into IUPK special mining business license if they wish to continue export mineral concentrates. While PT Freeport has in principle agreed to convert into IUPK, the company demanded the IUPK to have similar fiscal and legal terms as those set out in the COW such as a nailed down tax system (instead of the prevailing tax system under an IUPK regime) to help ensure investment stability as the company plans to invest US$15 billion in underground mine, and another more than $2 billion in domestic copper smelter. The government has turned this request. The company has also demanded for certainty over its request to extend the current contract until 2041.

Meanwhile, PT Freeport Spokesman Riza Pratama declined to confirm whether the company has agreed to the 51 percent divestment requirement. He was quoted as saying that there are four main issues in the ongoing negotiations with the government, which are related to each other under one large package, and thus can?t be separated. ?Divestment is just one of the four points of negotiations,? he said.

PT Freeport, which operates a giant gold and copper operations in Papua Province, has previously protested the 51 percent divestment obligation, as a 2014 government regulation allowed the company to divest only up to 30 percent stake as it operates underground mine. (*)