JAKARTA (TheInsiderStories) – The negotiations over the 51 per cent divestment of PT Freeport Indonesia shares continued to drag on. Given this situation, President Joko Widodo has ordered his cabinet ministers to finalize the divestment by April 2018.
“The direction of the President is to settle the divestment of 51 per cent PT Freeport Indonesia shares, which is a symbol of the national sovereignty, by the end of April, has been evaluated and so on,” Minister for Energy and Mineral Resources Ignasius Jonan said on late Monday (05/03).
The divestment of Freeport shares is in accordance with the Government Regulation Number 1, 2017 on the Fourth Amendment of the Government Regulation Number 23, 2010 in Mineral and Coal Business.
The talks have been delayed several times as both parties – the Indonesian government and Freeport – failed to come up with an agreement including the valuation of the shares and the shares sale mechanism.
The talks dragged on given that Freeport has also earlier entered a bilateral deal with another giant world miner Rio Tinto over production sharing of the Grasberg mining.
Minister Jonan reiterated the government’s intention to purchase Freeport McMoran shares directly as well as Rio Tinto’s participating interest in the mining site through a share-conversion mechanism.
Both parties have in principle agreed in August last year over the 51 per cent share divestment. However, both parties still needed to discuss the technical aspects of the share divestment, including ongoing operation, share divestment stability of investment and the development of smelter in the country.
Indonesia’s mining policy requires, among other, Freeport to divest its stake up to 51 per cent to local entities, build a new smelter to add value to its export commodities, if they wish to extend the existing 30-year contract.
Jonan has suggested the value of the 51 per cent stake to be divested by PTFI to be worth around US$4 billion. State-Owned Enterprises Ministry has set up a holding company to purchase Freeport’s shares joined with Employees Social System Security (BPJS Ketenagakerjaan), Papua Provincial Government, and districts.
Currently, Freeport has asked for a guarantee on rights to mine Grasberg up to 2041 before committing to billions of dollars of planned underground mine investments and a second Indonesian copper smelter.
Minister Jonan announced that Freeport can apply for a 10-year permit extension over the near term, to extend its current one, due to expire in 2021. This means the world’s largest publicly-traded copper company could secure the privilege of extending its contract five years before it expires.
The Indonesian government and Freeport are still facing off, far apart on a mutually-agreeable deal with contract renegotiation ongoing.
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.
Through the Ministry of State Owned Enterprises, 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).