Friday, 22nd September 2017

Divestment of Freeport's 51 Percent Stake A Must: Minister

id divestment, smelter development, The divestment of shares, PT Freeport Indonesia
Jakarta (Antara Bali) - Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan affirmed the government's stance that PT Freeport Indonesia (PTFI) should divest 51 percent of its shares and build a smelter facility in Indonesia within five years.

Luhut, at the Coordinating Ministry for Home Affairs here on Monday, stated that despite the continuous talks, the two points in the deal must be agreed by the government and PTFI. Two points, other than stock divestment and smelter development, are contract extension and investment stability.

"It is still underway (negotiation), and it is impossible for the two sides not to agree on it. The divestment of 51 percent shares and construction of a smelter is a must," he noted.

According to Luhut, the government will not be subject to any party, including Freeport, regarding the management of Indonesia's natural resources.

Nevertheless, the government continues to honor the existing contract, the Contract of Work (COW), which expires in 2021. Thus, the mines owned by the US company in Papua will belong to Indonesia once the contract expires.

This is similar to Mahakam block, East Kalimantan, where its management is returned to the government once the contract expires. In the context of the Mahakam Block case, the government provides an opportunity to the contractor (Total), whose contract has expired, to own a certain portion of share ownership.

"Our attitude is fixed and firmed, we will never back off. If we ignore it, then the contract will remain to expire in 2021. We should not bow to them, but we must respect every existing contract, similar to Mahakam in Total. As the contract expires, they would seek to rejoin. It can happen only with a share ownership of 39 percent," he explained.

Regarding the PT FI's request that the contract should be extended all at once until 2041, Luhut remarked that it can be negotiated after the formal agreement on the divestment.

"If it has divested 51 percent of the stake, it would pose no problem. Its technical aspect would be discussed to see whether it violates the rules (if contract extended to 2041)," he explained.

The Indonesian regulation states that the extension of mining operation permits can only be done gradually every 10 years and not 20 years as PTFI wishes. The contract of the company itself will expire in 2021, but the extension of the contract is required for the smooth progress of the underground mine development plan.(WDY)

Editor: I Gusti Bagus Widyantara

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