CEO Freeport Mcmoran Richard Adkerson with Indonesian ministers in one meeting - Photo by TheInsiderStories

JAKARTA (TheInsiderStories)–Indonesian government targets the negotiation with U.S’s miner Freeport-Mcmoran Copper & Gold Inc. (NYSE: FCX) including 51 per cent divestment, smelter development, investment assurance, taxation and extension of operations wrap up end of July, said government official on Wednesday (04/07).

The deadline in line with Indonesian government’s decision to extend the temporary special mining business license to July 31, 2018. The renewal of a temporary special business license has been signed on June 29 through a minister decree No. 1872/K30MEM/2018.

The U.S-based company previously held a current temporary special mining business license that will expire on July 4. This license is the second after the former license expired in December 2017.

The Energy and Mineral Resources Ministry’s (MEMR) mineral and coal Director General Bambang Gatot Ariyono said an extension was given as the government sees Freeport and PT Indonesia Asahan Aluminium (Inalum) are still negotiating related to the environmental aspect. The extension was granted to give more time to accomplish this environmental and other negotiation, he added.

“For other activities; divestment, smelter, and extension of operation mean that the provisions are already in the final process,” said Ariyono.

This extension entitled Freeport their operations in the Grasberg Mine in Papua until the end of this month. In the revised Decree, Freeport is granted to export processed and concentrated products.

In addition, the american miner can export he concentrates with a certain amount of customs duty. Furthermore, the MEMR has issued an extension of concentrate export license up to February 2019 with a volume of 1,247,866 metric ton.

Freeport needs this renewal license as the company can not export copper concentrate as the company will operate based on mining contract of works. According to the Government Regulation 01/2017 on Mineral and Coal Mining Business Activities, holders of mining contract of works are prohibited to mining commodities without processing.

Last June, global miner Rio Tinto Group (ASX: RIO) said the discussion of its divestment of 40 per cent interest in the giant Grasberg copper and gold mine in Papua is still on going.

The mining giant said discussions about the sale – including the price – are underway with with aluminium manufacturer and supplier, Inalum and Freeport. It said, no agreement has been reached and there is no certainty that binding agreements would be signed, Rio said in a statement noting reports of the potential purchase by Indonesia’s state mining holding company Inalum of Rio’s interest in Grasberg for US$3.5 billion.

The company has moved into direct negotiations with the Indonesian government over the proposed sale of its 40 per cent share of future production from the Grasberg mine, the U.S operator of the controversial but massive Papuan copper and gold project has revealed.

Grasberg, located in Papua, is one of the world’s largest copper and gold mines in terms of ore reserves and production. Rio Tinto has a joint venture with Freeport for a 40 per cent share of production above specific levels until 2021 and 40 per cent of all production after 2022.

Currently, Freeport has asked for a guarantee on rights to mine Grasberg up to 2041 before committing to billions of dollars of planned underground mine investments and a second Indonesian copper smelter.

The discussions have dragged on for several years and have been a major distraction for Freeport’s management team, which is led by chief executive Richard Adkerson. However, in recent months the outlines of a deal have emerged.

For Rio, selling down its interest in Grasberg would allow the company to exit a challenging mining jurisdiction and focus on its core assets. It would also open Rio’s share register to investors who cannot invest in the company because of environmental concerns related to some of the processes used at Grasberg.

But, it offered few new details, disappointing analysts who said the talks were likely to drag on. Freeport had hoped to reach a deal by the end of June when a temporary mining license is due to expire. Shares in Freeport fell 9.6 per cent to $17.

Grasberg, located in Papua, is one of the world’s largest copper and gold mines in terms of ore reserves and production. Rio Tinto has a joint venture with Freeport for a 40 per cent share of production above specific levels until 2021 and 40 per cent of all production after 2022.

Currently, Freeport has asked for a guarantee on rights to mine Grasberg up to 2041 before committing to billions of dollars of planned underground mine investments and a second Indonesian copper smelter.

President Director of Inalum Budi Gunadi Sadikin has stated the company has submitted Freeport’s share price calculation to President Joko Widodo. Sadikin did not deny the price of 40 per cent of Freeport Indonesia is around US$3 billion to US$5 billion, but he cannot reveal the exact price.

He considered Freeport’s share price is good enough for Inalum. “The valuation should get the best figures,” he said.

Sadikin added the valuation is quite good based on the economic value of copper and gold mine operated by Freeport Indonesia. One of the reserve in Kucing Liar mine can be exploited until 2061.

Email: fauzulmuna@theinsiderstories.com

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