JAKARTA (TheInsiderStories) - The Energy and Mineral Resources Ministry (ESDM) has granted Special Mining Business Permit (IUPK) to PT Freeport Indonesia, a subsidiary of US giant gold and copper miner Freeport McMoRan, while at the same time allowing Freeport to negotiate with the government on related terms and conditions of the IUPK such as export permit, shares divestment and other requirements.
Secretary General of the Ministry of ESDM M. Teguh Pamudji said at a press conference the discussion on the terms and conditions of the Special Mining Business Permit (IUPK) will last eight months, starting from Feb. 18, 2017 until Oct 10.
If no agreement is reached within eight months, Freeport Indonesia’s mining operating scheme will return to the Contract of Works (CoW) scheme and IUPK will be canceled by the government. As a consequence, Freeport Indonesia will be barred from exporting concentrates, Teguh Pamudji said.
Teguh Pamudji said in a press conference that the negotiation has started, with a focus on two approaches, short term and long term interest in order to provide legal certainty to Freeport Indonesia in the long run in line with the Government Regulation No. 1, 2017.
Indonesia government’s negotiation team members come from various institutions, namely ESDM, Finance Ministry, Fiscal Policy Agency (BKF), National Investment Coordinating Board (BKPM) and Attorney General.
Director General for Mineral Resources and Coal Bambang Gatot Triyono said the negotiation will focus on various issues, including stability of investment, facilities to be received by Freeport Indonesia, contract extension for first phase from 2021 to 2031 and second phase 2031 to 2041.
The second point of the negotiation is the divestment of Freeport shares, which will involve local governments (Mimika Regency).
The grant of exports will depend on the Freeport’s commitment to develop smelter.
In early February, the Indonesian Energy and Mineral Resources Ministry(MEMR) approved the change of mining contract of PT Freeport Indonesia from Contract of Works (CoWs) into Special Mining Permit (IUPK), as required by the Government Regulation (PP) No. 1/2017 and prevailing laws. The approval paves the way for the two mining companies to export its ores and concentrates.
The change of the contract scheme was made after the government issued a government ruling (PP), which among other, required mining companies to change the CoWs into IUPK, as mandated by the mining law. The change is a prerequisite for companies in order to obtain approval to export unprocessed minerals for certain period, while they are developing smelter.
However, Freeports wants the provisions of the CoW to be inserted into the IUPK. The provisions are including the fiscal certainty and legal guarantees. However, he did not explain further about details of the proposal.
IUPK status provides an opportunity for Freeport to export copper concentrate.
Freeport McMoRan Chief Executive Officer Richard C. Adkerson previously rejected the recommendation concentrates and IUPK export licenses issued by the Ministry of Energy. The official stance was expressed in a letter posted to the Minister Ignatius Jonan on 17 February.
Richard refused IUPK that has been issued because it did not assure fiscal and legal certainty as contained in the existing CoW. Whereas in a recommendation issued export permits by the Energy and Mineral Resources Ministry, Freeport is required to change the status of its CoW into IUPK in order to allow the company exporting its copper and gold. (*)