Govt' Softens Up on Freeport
11 April 2014 13:10 WIB
TEMPO.CO, Jakarta - Bargaining between Freeport Indonesia and the government continues. The multinational mining company is required to build a smelter and reduce its operating area to a maximum of 25,000 hectares. In addition, the company must increase its royalty obligations. These points are written in the Mineral and Coal Mining Law No. 4/2009.
Another requirement is to divest 51 percent of its shares to Indonesia. Freeport was only willing to release 15 percent last year. However, Coordinating Economic Minister Hatta Rajasa insisted on Freeport divesting a minimum of 51 percents of its shares in accordance with Government Regulation No. 24/2012.
R. Sukhyar, the director-general of Mineral and Coal at the Energy and Mineral Resources Ministry, said that the government was seriously conisdering extending its Contract of Work (CoW) with Freeport but Freeport's seriousness in investing in Indonesia became a question. "If they mean it, the government would consider it," Sukhyar told Tempo last Tuesday. The investment refers to the plan on building a smelter and an underground mine.
With that consideration, the result was unexpected, the government relented on the divestment issue and seems willing to accept 30 percent of Freeport's shares. "Divestment of 51 percent is only if they do not do processing and refining. Besides, Freeport will develop an underground mine," he said.
In response to the news, Freeport Indonesia CEO, Rozik B. Soetjipto said that the discussion about divestment was not yet final. "Freeport had already conveyed to the government (its position), but there had been no formal decision until now," Rozik told Tempo via telephone.
The government hopes that with a large amount of shares, the dividend will also be large. However, this may have a restricting effect on future mining investments.
According to Rozik, the discussion was still awaiting the requirement to count the return of investment on factory integrated underground mine. However, he asserted that the company would comply with the Contract of Work. As for the development of a smelter, he said that, "we are cooperating with Antam and we are reviewing the feasibility study."
This latest development has triggered a number of commentaries. Marwan Batubara, the Indonesia Resources Studies energy observer, has asked the government not to give up too quickly on negotiating the details in the contract work. "If you can get more, why not try it?" he said.
BERNADETTE CHRISTINA | AYU PRIMA SANDI | MUCHAMAD NAFI
