PT Freeport Indonesia (PTFI) ore production capacity at the Grasberg Block Cave and DMLZ underground mines reached 54,800 metric tons per day during the second quarter (2Q) of this year, its parent Freeport McMoran Inc., (NYSE: FCX) reported on Thursday (07/23) - Photo by the Company

JAKARTA (TheInsiderStories) – President Joko Widodo is said to feel optimistic about the ongoing divestment negotiations between the Government of Indonesia and U.S Freeport McMoran Inc. (FCX).

Through his official Facebook page, on Wednesday (15/11), Widodo expressed his full support for the negotiation team led by Finance Minister Sri Mulyani Indrawati to fight for a 51 per cent portion of Freeport’s shares.

“Keep pushing for 51 per cent – do not back down!” the President declaimed at a student gathering in Manado on Wednesday (15/11).

The Indonesian government finally embarked on meaningful action to complete the long takeover of the PT Freeport Indonesia (PTFI) mining operation.

Through the Ministry of State Owned Enterprises (SOE), the government is ready to acquire the U.S.-based copper and gold mining company’s shares, through a national mining holding company led by PT Indonesia Asahan Aluminium (Inalum).

Inalum, which is 100 per cent-owned by the government, will soon become a giant holding company that will supervise other state-owned mining and energy companies as well: PT Aneka Tambang Tbk (IDX:ANTM), PT Bukit Asam Tbk (IDX: PTBA), and PT Timah Tbk (IDX: TINS).

The government plans to use Inalum as a vehicle to take over the operations of Grasberg, among the world’s largest copper and gold mines, in Papua Province, from Freeport McMoran.

FCX currently owns 81.28 per cent of local subsidiary Freeport Indonesia, but following intense negotiations, it has finally agreed to shed up to a 51 per cent stake to local entities. The Indonesian government currently owns a 9.36 per cent stake in the Indonesian unit.

On 29 November, the three publicly-listed companies will hold shareholders meetings to determine the legal status of the company, which will be no longer fully controlled by the government directly.

The companies said the government’s 65 per cent stake in each will be transferred to Inalum, which will make them subsidiaries of the aluminium producer, currently fully-owned by the government.

Fajar Harry Sampurno, Deputy of SOE Ministry, expects the plan to set up a holding company can improve both efficiency and financial strength so as to facilitate the development of business, especially downstream.

“At the shareholders meeting, the boards will request agreements to change the entities’ legal status so that it comes under Inalum management,” he said.

Despite the conversion of the status, he stated, the three companies will be treated equally and are still under government evaluation. Any strategic actions will be supervised by the government, through Inalum as the parent company.

These companies also do not need to carry out any mandatory tender offer to comply with capital market regulations, according to Hambra, Deputy for Business and Infrastructure of SOE Ministry.

SOE Minister Rini Soemarno has said on several occasions that the holding entities will create greater synergies and cost efficiency, while at the same time expanding the SOEs’ equity, giving them more access to credit and facilitating larger investments.

In September Rini appointed Budi Gunadi Sadikin, former president of Bank Mandiri, Indonesia’s largest lender, as the Chief of Inalum. Sadikin, then a member of the SOE minister’s special staff, was given the task to prepare Inalum to purchase Freeport shares.

The government and Freeport Indonesia were initially scheduled to complete negotiations in October, but the deadline has been extended until January 2018 as several issues remain unresolved.

Written by Elisa Valenta, email: Elisa.valenta@theinsiderstories.com