American miner, Freeport-McMoRan Inc., (NYSE: FCX) aimed to expand its existing copper smelter at Gresik, East Java by 30 percent - Photo by Finance Ministry

JAKARTA (TheInsiderStories) – Ministry of Energy and Mineral Resources (MEMR) gave an extension for PT Freeport Indonesia‘ (PTFI) operating permit, through a Special Mining Business License (SMBL), to 2031, said the minister yesterday (12/19).

But there are several requirements to obtain the permit, like 51 percent shares divestment to Indonesian hands. A state-owned enterprise, PT Indonesia Asahan Alumunium (Inalum) will take over the shares once the transaction is complete.

Based on the rules regarding the SMBL stipulated in Law Number 4 Year 2009 concerning Minerals and Coal, the extension is carried out twice 10 years.

According to the minister, Ignasius Jonan, before the first 10-year extension ends in 2031, Freeport will re-apply for the second 10-year extension or until 2041. It will review various aspects such as the issue of paying taxes to fulfill the environmental aspects.

For the completion of PTFI shares sale, yesterday, Indonesia’s Supreme Audit AgencyCopper said the US’s miner Freeport-McMoRan Gold & Copper Inc., (NYSE: FCX) must pay Rp 460 billion (US$31.72 million) in royalties for thousands of hectares of protected forest it used without a permit.

A 2017 state audit of operations at Grasberg copper mine in Papua, the miner’ use of more than 4,500 hectares of protected forest in which to deposit its tailings and had begun mining underground without a permit.

There had been no permit to use the forest area, and the damage that the disposal of tailings waste had on the ecosystem reached Rp185,58 billion. Its estimated the company make a damage worth of $13.3 billion resulting from tailings from the mine.

The auditor findings on the impact of ecosystem damage have also been completely reviewed and approved by the Ministry of Environment and Forestry. This was conveyed by fourth head of the agency, Rizal Djalil at a press conference in Jakarta on Wednesday (12/19).

Likewise with the issue of tailings disposal, PTFI has made a roadmap as a settlement action and the discussion has been carried out with the LHK ministry. In addition, the Minister of Environment and Forestry Siti Nurbaya affirmed that the issue of handling mining management had also been discussed by the two related institutions to strive for a greater positive impact in the future.

When asked about the indications that there was large environmental damage caused by mining activities, she claimed that the handling efforts took a long time, which was around 5-10 years. Moreover, the mining production capacity is very large, which is around 160 thousand to 200 thousand tons per day.

Therefore, the best procedure is to restore the ecosystem together with a reduction in the amount of production.

As for the environmental issues, there are also ongoing discussions between the ministry and the Papuan government. The government hopes that there is a clear agreement with the regional government so that the intention to have a majority shares in PTFI is reached.

The government plans to give 10 percent of share ownership to the Papuan people. The auditor suggested that the 10 percent share ownership not be made through a deposit of capital participation, but by using a dividend calculation pattern.

After lengthy discussions, Inalum agreed to buy 40 percent of the management rights, or a participating interest (PI) in the Grasberg mine in Papua from Rio Tinto for $3.85 billion. The PI will later be converted into around 40 percent of PTFI’s shares.

Coupled with the current government-owned shares and PT Indocopper Investastama’ shares which were also acquired, Inalum’s total shares in PTFI will reach 51.38 percent. Inalum will pay $3.85 per share.

US$1: Rp14,500

Written by Daniel Deha, Email: