Minister: Government ready to face PTFI at international arbitration

Minister of Energy and Mineral Resources Ignasius Jonan said that the government is ready to face gold and copper giant PT Freeport Indonesia (PFIT) should the company decides to go to the court to challenge recently-introduced mining rules.

Ignasius said in a statement on Saturday that it?s better to settle the ongoing dispute at the court rather than the company using the issue of workers layoff to pressure the government. ?It (arbitration) is better than exploiting employee layoff as a means to pressure the government,? he said in a statement.

Jonan made the statement after Chappy Hakim announced his resignation as president director of PTFI, a local subsidiary of US-based Freeport McMoRan Copper & Gold Inc. Chappy, who was only appointed to the post three months ago, is said to resign from the top post as he opposed plan by the company to go to international arbitration in The Netherlands to challenge the government?s new mining regulations which move against the company?s current mining contract of work. Tony Wenas, President Director of PT Riau Andalan Pulp and Paper is said to be the leading candidate to become the new president of PTFI.

The government introduced last month new Government Regulation No 1/2017 and the implementing rulings allowing mining firms to continue export of mineral concentrates including copper concentrates produced by firms such as PTFI for another five years, which has been banned since January 12 of this year as stipulated by a 2014 government regulation. Companies, however, are required to meet tougher requirements to be allowed to resume export including conversion of their mining permit status from mining contract of work (COW) to special mining business license (or IUPK), and commitment to develop domestic smelters within five years. Mining firms controlled by foreign investors such as PTFI must also gradually divest up to 51 percent of their state to Indonesian investors.

While PTFI has agreed to convert its COW to IUPK, the company demanded certain conditions notably fiscal and legal terms that are similar to those set in the COW regime as part of investment stability agreement. A key condition demanded by PTFI is that its new IUPK acknowledged a nailed-down tax principle as set in the COW. The government, however, has said that an IUPK must follow prevailing regulations including in term of tax, not a nailed-down principle.

PTFI has suspended production at its Grasberg mine in Papua since February 10 and started laying off staff as the company has been unable to export copper concentrates since January 12. In a bid to allow the company to resume export, Jonan issued a ?transitional ruling? applying the fiscal terms in the COW to IUPK, pending completion of negotiation with the company over the final terms of the IUPK, hopefully to be reached within six months. The ministry last week then issued export recommendation letter for PTFI and another gold and copper giant PT Amman Mineral Nusa Tenggara for export of copper concentrates with the former getting an export quota of 1.1 million tons under a permit that is valid until February 16, 2018.

Riza Pratama, PTFI Spokesman was quoted by Kontan as saying that the company has yet to agree to the IUPK issued by the ministry for the company as it does not accompanied with the investment stability agreement requested by the company. ?We also have yet to agree on the export permit as part of the requirements is for PTFI to agree (to convert) into IUPK,? Riza said.

President of Freeport McMoRan Richard Adkerson is scheduled to hold a press conference this afternoon. (*)