JAKARTA (TheInsiderStories) - PT Freeport Indonesia, a subsidiary of US giant copper and gold miner Freeport McMoRan, has told the Indonesian government of its agreement to divest 51% shares to the Indonesian government as well as the changing of its Contract of Works (CoW) scheme into Special Mining Permit (IUPK).
IUPK status provides an opportunity for Freeport to export copper concentrate. If it agrees with the status change, the company’s concentrate production will be running at 100 percent and end the company’s cost efficiency program, including laying off workers.
As part of the CoW, Freeport is required to divest 51% of its shares to the Indonesian government. The divestment has been delayed due to disagreements over share valuation.
“They (Freeport Indonesia) has accepted it,” Minister for Energy and Mineral Resources Minister Ignasius Jonan told reporters in Jakarta on late Thursday, when asked by reporters whether Freeport has agreed to divest its stakes.
The divestment of 51% is in accordance with the Freeport’s CoW in 1991, said Minister Jonan.
Jonan said the stakes will be offered to the central government, in this case the state owned companies. If the government declined to purchase the stakes, the government will offer the shares to private national companies or the other option selling the shares through the capital market.
Freeport Indonesia has earlier submitted a proposal to the Indonesian government regarding changes of the Special Mining Business Permit (IUPK) that has been issued by the Energy and Mineral Resources Ministry.
The proposal was submitted directly by the Executive Director of Freeport Indonesia Tony Wenas and Director of FI Clementino Lamury.
Freeport Indonesia spokesman Riza Pratama has said the company is willing to change the status of the existing Contract of Work (CoW) into IUPK. However, FI wants the provisions of the CoW are inserted into the IUPK. The provisions are including the fiscal certainty and legal guarantees.
At present, Freeport only produces concentrates up to 40 percent of its full capacity, and sends the output to PT Smelting in Gresik, East Java. Smelting has mineral refining facilities with a capacity of 1 million tonnes of copper concentrate per year. The remaining 60% of FI’s output are exported. Therefore, it currently caps its production to a maximum 40% in tune with the capacity of Smelting Gresik. (HS)