Indonesia to Finish Negotiations With Freeport by June

The government will finalize its negotiations with the local unit of US-based Freeport-McMoRan in Indonesia over the massive Grasberg copper and gold mine in Papua by June, an official at the Ministry of Energy and Mineral Resources said on Thursday (11/01). (Reuters Photo/Beawiharta)

By : Adinda Normala | on 9:22 AM January 12, 2018
Category : Business, Corporate News

Jakarta. The government will finalize its negotiations with the local unit of US-based Freeport-McMoRan in Indonesia over the massive Grasberg copper and gold mine in Papua by June, an official at the Ministry of Energy and Mineral Resources said on Thursday (11/01).

Under a framework agreement announced in August last year, Arizona-based Freeport said it would divest 51 percent of Freeport Indonesia to the Indonesian government.

Freeport previously applied for a business license extension under a Special Mining Permit (IUPK), which will be valid until June 30. The government granted the permit to continue the contract talks.

"What has not been solved [in the negotiation] is the divestment, which is being led by the Ministry of Finance and the Ministry of State-Owned Enterprises. We’re still waiting for the outcome," Bambang Gatot Ariyono, director general of minerals and coal at the ministry, told reporters at a press conference.

Indonesia plans to acquire Rio Tinto's 40 percent participating interest in Freeport's Grasberg contract, which entitles the country to 40 percent of production above specific levels until 2021 and 40 percent of all production after 2022.

Bambang said the government and Freeport also discussed development of another copper smelter and the extension of the company's operations in the world’s second biggest copper mine until 2041.

Since 2014, Freeport has been building a smelter worth $2.1 billion located in Gresik, East Java, with a capacity of 2 million wet metric tons of copper concentrate. However, the construction has progressed slowly as the company has demanded certainty of its legal status after its Contract of Work expires in 2021.

The ongoing negotiations also require both sides to resolve the issue of a concentrate export permit, in which Freeport has not submitted an extension while its permit will expire on Feb. 16.

"We have not received a request [of concentrate export permit extension] yet," Bambang said.

According to Bambang, the company has exported 921,000 wet metric tons of copper concentrate out of its total quota of 1.1 million tons as of December.

Indonesia and Freeport have been in tough negotiations since last year after the government issued a new policy that requires miners to divest a 51 percent stake, relinquish arbitration rights and pay new taxes and royalties.

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