PT Freeport rejects government price offer for its shares
Tuesday, July 26 2016 - 03:05 AM WIB
PT Freeport Spokesman Riza Pratama was quoted by reports as saying that the company is maintaining the $1.7 billion price tag for the shares as initially proposed in January of this year. He added that the company objected to using the so-called replacement cost mechanism in valuing the shares as demanded by the government.
The government has insisted on PT Freeport, a local subsidiary of US giant Freeport McMoRan Copper & Gold Inc, to use the replacement cost mechanism, valuing the PT Freeport shares based on the total investment which has been made by the company since exploration until the divestment date deducted with accumulated depreciation and financial obligations as stipulated under Minister of Energy and Mineral Resources Regulation No 27/2013. By using this mechanism, the PT Freeport 10.64 percent shares is worth only $630 million. This price offer was made in April of this year.
Meanwhile, PT Freeport insists on market value of the shares, taking into account the company?s remaining reserves at the Grasberg mine in Papua until 2041. The company?s current contract expires in 2021. It remains unclear whether the government would extend the contract.
Director General of Mineral and Coal Bambang Gatot Ariyono said that the government will continue to negotiate with PT Freeport. He added both sides continue to differ on valuation method, and the time frame use, where the company uses a time frame until 2041, while the government limits the time frame until 2021.
The Office of the State Minister of State-Owned Enterprises has set up a consortium of state firms including PT Inalum, PT Aneka Tambang Tbk, PT Timah Tbk, and TP Bukit Asam Tbk to acquire the PT Freeport 10.64 percent shares. The central government holds the top priority in acquiring the stake, with the second priority given to local government of Papua. (*)