Minister issues transitional ruling to accommodate Freeport?s demand

Courtesy of Freeport

Minister of Energy and Mineral Resources Ignasius Jonan has issued Ministerial Regulation No 15/2017, described as a ?transitional ruling? which is expected to pave the way for miners such as gold and copper giant PT Freeport Indonesia to be able to resume export of mineral concentrates amid contentious debate over recently-introduced new export requirements.

Kontan reported on Friday that according to chapter 8 of the new ministerial regulation, the terms of the special mining business license (or IUPK) of mining firms such as PT Freeport are still the same as the terms set under the mining contract of work (or COW) regime including a nailed-down tax principle (tax terms under an IUPK should have been based on prevailing regulations, not nailed-down regulations).

The government last month introduced new Government Regulation No 1/2017 allowing among others miners to continue export of mineral concentrates for another five years, which has been banned since January 12 as stipulated by a 2014 government regulation, but under certain conditions including requirement to convert their mining permit status from COW into IUPK. PT Freeport was the first miner to announce readiness to convert its COW into IUPK but demanded certain conditions including nailed-down tax system to help ensure investment stability. The government, however, has insisted that an IUPK must follow prevailing regulations, not nailed-down system, resulting in protracted debate that has further caused delay in export of mineral concentrates including copper concentrates produced by PT Freeport, which earlier this week announced suspension of production activity at its underground mine in Papua due to delay in export.

Kontan quoted Head of Legal Bureau at the ministry Hufron Asrofi as saying that Ministerial Regulation No 15/2017 is a transitional ruling pending completion of negotiation process between the government and the miners over the terms and conditions of the IUPKs. ?It is categorized as transitional ruling to (allow for) completion of changes within 180 days,? he told the paper. The government and PT Freeport have six months to complete negotiation over the terms for the company?s IUPK.

It remains unclear whether PT Freeport will finally agree to the new transitional ruling. But Director General of Mineral and Coal at the ministry Bambang Gatot Ariyono said late last week that PT Freeport is expected to resume export of copper concentrates next week if the company could apply for export permit from the ministry this week.

Ahmad Redi, a law expert at the Tarumanegara University, said that the transitional ruling is in breach of the 2009 Mining Law, arguing that if the mining permit status of PT Freeport has been changed into IUPK it must follow the terms as set under an IUPK, not COW regime. (*)