Ministry to issue temporary IUPK for Freeport to resume export

Minister of Energy and Mineral Resources Ignasius Jonan plans to issue a new ministerial regulation on temporary special mining business license (temporary IUPK) for gold and copper giant PT Freeport Indonesia pending completion of negotiation between the government and the company over certain issues, Kontan reported on Monday.

The paper quoted a source as saying that the temporary IUPK will allow PT Freeport to resume export of copper concentrates and thus avoiding further layoffs.

According to a 2014 government regulation, export of mineral concentrates including copper concentrates produced by firms such as PT Freeport must be banned starting January 11 of this year as miners were supposed to have already completed the required domestic smelters. But the government on January 12 issued a new regulation allowing for the export of mineral concentrates for another five years under certain conditions including conversion of the miners? mining permits status from mining contract of work (COW) to special mining business license (IUPK), which among others apply a tax system based on prevailing regulation instead of nailed down regulation under the COW regime.

While PT Freeport, a subsidiary of US-based Freeport McMoRan Inc, agrees to convert the COW into IUPK, the company demanded the application of fiscal and legal terms similar to those set under the COW regime including nailed down tax system to help ensure stability of its investment, a request rejected by the ministry. The company has threatened to go to international arbitration if no win-win solution is reached with the government within the next several months.

Meanwhile, as PT Freeport has not been able to resume export since January 12, the company has suspended mining operations, forcing its contractors to lay off some 2,100 workers as per March 16, Kontan quoted the source, while the company has suspended some 250 of its permanent workers.

Head of Legal Bureau at the ministry Hufron said that the minister had no plan to issue temporary IUPK for PT Freeport.

But PT Freeport Spokesman Riza Pratama acknowledged that the company is currently reviewing the points in the proposed temporary IUPK.

Ahmad Redi, an observer at the Tarumanegara University, said that issuing a temporary IUPK for PT Freeport will be in breach of the 2009 Mining Law which does not acknowledge such temporary license. (*)