JAKARTA (TheInsiderStories) - U.S giant gold and copper producer Freeport McMoran Inc. says the company set the price of 10.64 percent shares of PT Freeport Indonesia (PTFI) being offered to the government of Indonesia at US$1.7 billion, based on contract extension until 2041 and the new investment plan for Grasberg underground mining project with total investment of US$15 billion, said a director of Freeport Indonesia.
Clementino Lamury, director and Executive Vice President of PTFI said during a hearing with Commission VII of the House of Representative (DPR) on Wednesday that the company also takes into account the investment which has been pledged in the mining project worth $4 billion.
Freeport Indonesia has sent proposal letter to the government of Indonesia on Jan. 14 on the divestment of PTFI shares and expects to receive response from the government by March 1.
Currently, PT Freeport Indonesia is 90.64 percent owned by Freeport McMoran and the remaining stake of 9.36 per cent is own by the Indonesia government.
Based on the regulation issued by previous government, Freeport is required to divest up to 30 percent of its shares to the government. The shares will be divested in stages.
Beside developing underground mine, the company also plans to fulfill its obligation to develop new smelter in Gresik, East Java with total investment $2.3 billion with annual production capacity of 2 million tons of cathode cooper per year. The smelter’s location nears the existing Gresik Smelting.
PTFI supplies copper to the plant at volume of 300,000 tons per year or around 40 to 50 percent of the company production capacity.
“We just signed the engineering procurement. We expect we can start the project construction in July,” Clementino said.
According to the Director General of Mineral and Coal for Minister of Energy & Resource Minerals Bambang Gatot Aryono, the government will set up the special team to value the 10.64 percent shares of Freeport Indonesia this week and will start evaluating the shares price next week.
“Evaluation will be conducted by government ministries . We will invite an independent appraisal firm to asses the shares offering. We’re doing the evaluation process regarding the fairness of the offer Freeport divestment,” Gato Aryono said.
According to him, it is too early to declare that the PTFI shares price is expensive. Bambang added, if the valuation is agreeable by both parties, the government will execute the share purchase or appoint a state-owned enterprises (SOE) to acquire Freeport shares.
State Own Enterprises Ministry office had assigned PT Indonesia Asahan Inalum and PT Aneka Tambank Tbk (IDX: ANTM) as a lead consortium to purchase 10.64 percent of PT Freeport shares. PT Bahana Securities and PT Danareksa Sekuritas have been asked to become financial advisers for the transaction.
Based on the Government Regulation No. 77 Year 2014 on the Implementation of Mineral and Coal Mining Business Activities, Freeport has an obligation to divest 30 per cent stake of Freeport Indonesia by 2019.
Freeport’s long-held desire to continue mining in Indonesia beyond 2021 has been beset by controversy, including cabinet infighting, resignations and a major political scandal that led to the resignation of the parliamentary speaker. (*)