Papua government plans to buy Freeport shares
Friday, December 4 2009 - 01:57 AM WIB
FI spokesman Mindo Pangaribuan said in Jakarta on Thursday that the provincial administration of Papua had discussed the possibility of buying Freeport?s shares held by Indocopper, a local subsidiary of the American mining giant.
?The negotiations are currently underway,? Mindo told members of the House?s Commission VII during a hearing. He, however, was reluctant to unveil the percentage of Freeport?s shares which would be bought by the Papua government.
Under its first contract of work in the 1970s, Freeport-McMoran was required to divest its stake in FI to the government or to local firms, but no minimum percentage was set.
To comply with the contract, Freeport set 10 percent of its stake for the government.
However in the company's second contract of work, the government's shares were diluted to 9.36 percent because the government did not provide cash when the company received fresh capital injection.
Freeport divested another 9.36 percent to Indocopper, owned by the Bakrie family after it renewed its contract of works in 1991. However, in 1992, Freeport bought a 51 percent stake in Indocopper.
Bakrie then sold the remaining 49 percent to Nusamba business group owned by former president Soeharto?s close friend Bob Hassan. But in 2003, Nusamba sold back its ownership to Freeport after failing to repay its debts to the American company. This raised Freeport-McMoran?s ownership to 90.64 percent, with the government holding the remaining 9.36 percent
In 2004, the Indonesian government had asked the American company to sell back the 9.36 percent stake to a local company. Freeport-McMoran agreed and offered a price taged of US$619 million for the shares. However, the finance ministry refused to buy the shares.
During the hearing with the House members, FI's President Director Armando Mahler said that the company was expected to book a net profit of about US$ 2.33 billion this year, about 150 percent higher than in the previous year.
The company, which operates the world?s largest copper and gold mine in Grasberg Papua, expects to process 235,000 tons per day of ore and it expected to produce 1.4 billion pounds of copper or equal to 635,000 tons. It plans also to produce about 1.9 million troy ounces of gold or equal to 60.4 tons. (*)