JAKARTA (TheInsiderStories) – Indonesia’s Energy and Mineral Resources Minister Ignasius Jonan announced on Tuesday (8/29), the government has concluded a deal with U.S. giant miner Freeport-McMoRan Inc. (FCX) which will allow the company to apply for a permit to continue operations at its giant Grasberg gold and copper mine in Papua.
According to Jonan, Freeport can apply for a 10-year permit extension over the near term, to extend its current permit, which will expire in 2021. This means the world’s largest publicly-traded copper company could secure the privilege of extending its contract five year before it expires.
“Freeport is committed to develop a smelter until Jan, 2022 since Special Mining Business License is signed,” the Minister said at in a press briefing in Jakarta after meeting with Freeport McMoRan’s Chief Executive Officer Richard Adkerson on Tuesday joined with Finance Minister Sri Mulyani Indrawati.
The Phoenix, Arizona-based company has been in lengthy discussions with the government of Southeast Asia’s largest economy over a number of issues that will affect its operations in the world’s second-biggest copper mine.
Indonesia’s mining policy requires, among other, Freeport to divest its stake up to 51 percent to local entities, build a new smelter to add value to its export commodities, to extend its 30-year existing contract.
“Freeport will divest 51 percent of its stake [in Freeport Indonesia –the local arm that secures the mining permit] and this is being negotiated in details and will be attached in the IUPK,” Jonan said, adding that President Joko Widodo, has requested the new special mining license to be finalized this week.
He said the price over Freeport’s share will be discussed later.
Minister Indrawati explained, contract extension for Freeport must ensure that the government’s demands for the U.S firm to divest 51 percent of its shares in its local arm and construct a smelter at the Grasberg site to be proceeded smoothly.
She added the government is working to ensure that the state revenue from tax and royalty payments from Freeport’s operation in Grasberg is better than the existing contract of works signed in 1967 and renewed in 1991.
She also said that the finance minister is coordinating with government-related entities, including state-owned enterprises, local government enterprises, the local government, to the private sector, over who will buy Freeport’s planned divested shares.
Adkerson informed reporters at the same press briefing, event that the miner is now working to build underground mining operations, a critical point that needs a huge investment of as much as US$17 billion to $20 billion between today until 2031. “It is a big issue to have concluded an agreement with the government,” he said.
He also said the mining giant is firm on its commitment to divest its stake in the Grasberg operation as well as developing a new smelter at the mining site, as required by the Indonesian government. “We agree to increase government ownership to 51 percent over time, in a way, on market price value,” he said.
It was feared that copper concentrate exports from the Freeport operation in Indonesia could have been interrupted, if the two sides had failed to reach a deal on a new mining permit before its temporary export permit expires in October.
The U.S. mining giant ships about two-thirds of the copper concentrate it produces from the Grasberg mine, while keeping the remainder to be processed domestically.
(Writing by Linda Silaen, Email: email@example.com)