Freeport Seeks Extension to Temporary Mining License

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

JAKARTA (TheInsiderStories)—Executive Vice President PT Freeport Indonesia Tony Wenas on Friday (22/06) said the company has proposed an extension of the temporary special mining business license to the Ministry of Energy and Mineral Resources (MEMR) in early June.

The current temporary special mining business license held by Freeport will expire on 4 July. This license is the second after the former license expired in December 2017.

If it is not renewed, the company cannot 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.

Meanwhile, The MEMR’s Mineral and Coal Director General Bambang Gatot Ariyono said the government has not received the temporary special mining business license extension request.

“We had not accepted it, [Freeport] submitted it to the Minister [of Energy and Mineral Resources Ignasius Jonan],” he said.

The government and Freeport are currently negotiating over four main issues namely divestment, smelter development, investment assurance, taxation and extension of operations.

One of the most crucial negotiations is related to the divestment. Freeport 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.

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.

Previously, the State-Owned Enterprises (SOEs) Minister Rini Soemarno set a new target for PT Indonesia Asahan Alumunium (Inalum) to complete the divestment of stake in PTFI in June 2018. However, no agreement has been reached and there is no certainty that binding agreements would be signed.

President Director of Inalum Budi Gunadi Sadikin said 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.

Inalum is still discussing the divestment process with Freeport and Rio Tinto. Budi said that the progress of the discussion is quite advanced, including the rights and obligations of each party in the transaction. Budi also ensures his side will continue to try to complete this plan in line with the target set by the government.