JAKARTA CLAIMS WIN IN FREEPORT DISPUTE
Government hopes divestment is made in one block rather than spread out
JAKARTA
INDONESIA’S government left no doubts as to who it believes got the better deal in its agreement with Freeport McMoRan Inc on the future of the Grasberg copper mine.
After Freeport agreed to divest a 51 per cent stake in Grasberg, the world’s second-biggest copper mine, Indonesia’s Energy and Finance Ministries posted on social media# Free port Ta at Indonesia Be rd au lat, or “Freeport is obedient, Indonesia is a sovereign state.”
The bombastic statement illustrates Indonesia’s view that the dispute with Freeport over the mine was all about asserting the country’s rights to its mineral resources. While Indonesia can point to a victory that appeals to nationalist sentiment, pinning down the details on the divestment indicates a further fight with Freeport.
Indonesia’s President Joko Widodo was the driving force behind the agreement demanding the divestment, a new smelter at the mine and that Freeport pay higher taxes, said Energy and Mineral Resources Minister Ignasius Jonan.
The United States company said it will divest 51 per cent of PT Freeport Indonesia (PT-FI) and build a second smelter at Grasberg, in the eastern province of Papua, and will also commit to invest up to US$20 billion (RM85.4 billion) in the mine.
In return, Freeport can “immediately” apply for a 10-year extension of its operations from 2021, and potentially maintain operational control through 2041, paying fixed tax and royalty rates during that term.
“While there are a lot of issues still to be worked out, politically this is a win for the government,” said Keith Loveard, a senior analyst at Concord Consulting.
The biggest of the raft of issues to resolve is how the divested shares will be valued and who will buy them.
Last year, Freeport offered a 10.64 per cent stake in PT-FI that valued the mine at US$16.2 billion while the government counteroffered at US$630 million. Freeport believes that any Grasberg valuation should include the mineral resource, while Indonesia maintains that resource is essentially held by the country.
Freeport has to sell 41.64 per cent of PT-FI to reach the divestment target, adding to a 9.36 per cent share the government already holds.
Indonesia hopes that the divestment would be made in one block rather than spread out and would be completed by the end of next year, said State Owned Enterprise Minister Rini Soemarno yesterday. Reuters