JAKARTA (TheInsiderStories) – PT Freeport Indonesia, a subsidiary of US giant copper and gold producer Freeport McMoran, said it cannot accept the government’s decision to allow Freeport to export concentrates on condition that the company agrees to change its Contract of Works (CoW) changed into Special Mining Permit (IUPK).
Freeport said the company and the Indonesian government negoiated over the past six months to reach an investment agreement. Freeport maintains its position that exports would be allowed and the Contract would remain in effect prior to signing the investment agreement.
“However, the Government decrees now mandate that our Contract be terminated to obtain permission to export, which we cannot accept,” Freeport President and CEO Richard C. Adkerson said in a press conference on Monday.
Freeport indicated that it now has two options to opt, continuing negotiation with the Indonesian government in order to find a mutually acceptable solution, or taking arbitration in order to protect the company’s employees, communities and stakeholders.
Freeport said on Jan. 17, 2017, PTFI submitted to the Ministry of Energy and Mineral Resources a notification describing breaches and violations of the Contract by the Government. PTFI expressed a sincere hope that this impending dispute with the Government, can be resolved bu reserved all of is rights pursuant to the Contract against the Government, including the right to commence arbitration to enforce all provisions of the Contract and to seek applicable damages.
Because Freeport cannot export without forfeiting its Contract, there will be severe unfavorable consequences for all stakeholders, including the suspension of capital investments, a significant reduction in domestic purchases of goods and services, and job losses for contractors and workers as we are forced to adjust our business costs to match constrained production, the company said.
Freeport however still hopes of attaining an acceptable resolution. “I remain hopeful that we can find a mutually acceptable solution for our Company and the Government,” Richard Adkerson said.
Adkerson has been in Jakarta for many days working to address issues being faced by the company from the recent decrees from the Ministry of Energy and Mineral Resources on exports of copper concentrates.
“Together with our management team and members of the local community, we have been working to protect the interest of the Company and its many stakeholders, including our valued employees,” he said.
Even though Indonesia’s Mining Law of 2009 states that Contract of Work remain in force during their term, the Government is seeking to require Freeport to forfeit the 1991 Contract of Work in return for an uncertain operating license and short-term approval to export.
“We cannot relinquish the legal rights provided by the Contract which are the basis of long-term stability and protect for our Company and vital to the long-term interests of our employees, communities, and stakeholders,” he said.
Legal and fiscal certainty is necessary for PTFI to make the massive long-term investment of capital necessary to develop our resources in he remote area of our operations in Papua, he noted.
Freeport has made $12 billion of investment and is undertaking $15 billion of ongoing capital investment to develop our underground resources. It has built a business with a workforce of 32,000 Indonesians.
Under the Contract, the Government has received 60% of the direct financial benefits of our operations. Taxes, royalties and dividends paid to the Government since 1991 have exceeded $16.5 billion while Freeport McMoRan has received $10.8 billion in dividends.
Future taxes, royalties, and dividends to be paid to the government through 2041 are expected to exceed $40 billion. (*)