The Signing Agreement of PT Freeport Indonesia Shares Sales at the MEMR Office on Thursday 27/09) - Photo by SOEs Ministry

JAKARTA (TheInsiderStories) – Finally, the PT Freeport Indonesia (PTFI) divestment shares signed after a long years of discussion. The signing ceremony between the state-owned miner PT Indonesia Asahan Aluminium (Inalum), US’s Freeport-Mcmoran Gold & Copper Inc. (NYSE: FCX) and Australia’s Rio Tinto Rio Limited (ASX: RIO) held at the Energy and Mineral Resources ministry on Thursday (29/09).

“Finally we can reach a 51 percent shares sale agreement and we are also finalizing the final stage of this transaction,” Finance Ministry Sri Mulyani Indrawati told the media at the signing ceremony accompany with EMR minister Ignasius Jonan and State Owned Enterprises (SOEs) minister Rini Soemarno.

While Jonan stated, its expecting the transaction of the PTFI shares sales wil closing by the end of this year. He added, the agreements have been signed include the PTFI divestment agreement, PT Rio Tinto Indonesia Share Purchase Agreement, and the PTFI Shareholders Agreement.

The signing was carried out by President Director of Inalum Budi G. Sadikin and FCX CEO Richard Adkerson. Thus the number of PTFI shares owned by Inalum will increase from 9.36 percent to 51.23 percent.

The Government of Papua will get 10 percent of 100 percent of PTFI’s shares. The change in share ownership will officially occur after a payment transaction of US$3.85 billion to FCX, and to be completed before the end of 2018.

“With the signing of this agreement, the Government will issue special mining permit with a maximum operating period of 2×10 years until 2041, ” adds by Jonan

Furthermore, he continued, PTFI has an obligation to build a copper smelter with a capacity of 2 to 2.6 million tons per year and it is expected to be completed in less than 5 years.

“The license that will be given by the Government to PTFI in the form of special mining permit is the government’s commitment in maintaining the investment climate so as to provide certainty and security to foreign investors to invest in Indonesia.”

Soemarno added, in line with the downstream program of the Indonesian mining industry, Inalum and PTFI will continue to be encouraged so that the downstream process can run well, not stop at the construction of copper smelters, but also processing anode sludge as a smelter by-product into gold.”

Meanwhile, Indrawati explained, the government provides certainty regarding PTFI’s tax obligations and non-tax obligations at the central and regional levels. With the completion of PTFI’s share divestment and the transition of the Contract of Work (CoW) to become an special mining permit, she continues, it can be ascertained that PTFI will contribute a greater amount of state revenue compared to when the CoW.

Inalum has secured $3.8 billion short-term loan facility from a syndicate banks led by Bank of Tokyo Mitshubisi to pay 51 percent of PT Freeport Indonesia  divestment shares. To pay this debt, the miner has a plan to issue global bond in the couple months at the Singapore Stock Exchange, said Sadikin. He continued, the step was taken in order to relieve the company cash flow.

Based on the government agreement with U.S’s miner on August 29, 2017, the settlement of PTFI’s problems was carried out through four agreements that must be resolved simultaneously, namely changes to the legal basis of the Contract of Work  to the Special Mining Business License which is followed by an extension of the operation to a maximum of 2×10 years until 2041.

Next, the obligation to build a smelter for five years or not later than January 2022. Assuring the stability of state revenue is greater than revenue through the CoW and the divestment of PTFI’s shares was 21 percent.

Last year, the government and Freeport-Mcmoran made an agreement to complete the contract renegotiation between the two sides. The agreement includes divestment of 51 percent PTFI shares, build smelter in Indonesia, higher state revenues greater than Contract of Work and a maximum extension until 2041.

Grasberg, located in Papua, is one of the world’s largest copper and gold mines. Freeport has been mining Grasberg since 1967 and received a contract extension in 1991. Its operation was based on a contractual scheme called mining contract of works, which the government has phased out since the introduction of new mining law in 2009.

While Adkerson asserted by the transitional process of part of Freeport Indonesia‘s share ownership, the parties agree on the operation of its unit until 2041 with a mechanism to be further detailed. This agreement, said Adkerson will strengthen the partnership that has been established between government and the U.S’s miner as shareholders of PTFI.

PTFI has proven and probable reserves for copper of 38.8 billion pounds, gold of 33.9 million troy ounces  and silver amounted to 153.1 million troy ounces.

Email: linda.silaen@theinsiderstories.com

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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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