Team split over valuation of Freeport shares

A government team assigned to evaluate the price of PT Freeport Indonesia shares has yet to complete its task as members are still divided on what parameters to be used in the valuation.

?We have met two times, we?re still discussing (what) parameters to be used, there has been no agreement yet,? said Director General of Mineral and Coal Bambang Gatot Ariyono on Wednesday as quoted by Kontan.

The team, comprises of officials from related ministries, is supposed to complete the valuation within 60 days after PT Freeport officially offered its 10.64 percent shares to the government as part of a mandatory divestment program on January 14. PT Freeport, a subsidiary of US-based Freeport McMoRan Copper & Gold Inc, gave a price tag of US$1.7 billion for the 10.64 percent shares. Given the set deadline, the central government is supposed to respond to the offer by March 14 of this year.

Some officials have said that the $1.7 billion price tag is too expensive.

Bambang said that the $1.7 billion price is based on a parameter of PT Freeport?s mining operation lasting until 2041. The company is assuming that its current contract, which expires in 2021, will be extended by the government.

Some government officials, however, said that the share price should be based on PT Freeport?s operation until 2021, not until 2041. Bambang added that there has also been debate whether the share price valuation should be based on market price.

If the government declines to buy the shares, the shares will be offered to the Papua provincial administration. Next in line are state-owned companies, followed by provincial-owned companies, and last are the Indonesian private investors. (*)