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Freeport CEO Richard Adkenson (left), Indonesia Finance Minister Sri Mulyani Indrawati and Energy Minister Ignasius Jonan exchanged views during a press conference (credit: ESDM)

Freeport agrees to divest 51% shares to Indonesia, contract extended

JAKARTA ( – PT Freeport Indonesia (PTFI), a subsidiary of giant US copper and gold miner, has finally agreed to divest 51% of its shares to the Indonesian government after a long talks. In return, Freeport is granted a contract extension.

The agreement was inked  on Monday Aug. 29 by the Indonesian Energy and Mineral Resources Minister Ignasius Jonan, Finance Minister Sri Mulyani Indrawati who represented the Indonesian government, and Freeport McMoran’s CEO RIchard Adkerson.

Following is the key highlights of the agreement between the two parties:

  • Both parties agreed to change the Contract of Work (COW) of Freeport to develop the Grasberg mining site to Special Mining Business Permit (IUPK);
  • Freeport agreed to divest 51% of Freeport Indonesia shares to the Indonesian government;
  • Freeport agreed to develop smelter plant in the next five years in Indonesia
  • Indonesian government secures better and assurance of revenues under new scheme (IUPK) compared to CoW), while Freeport is given assurance for its long term investment in Indonesia.
  • Since Freeport has accepted the above conditions, Freeport is granted contract extension of 2×10 years until 2041.

As for the 51% stakes, the Indonesian government has indicated that the stakes would be purchased by a holding mining company whose members.

Long Talks

(Photo Credit : ESDM)

In April this year, Freeport has agreed with temporary Special Mining Business Permiet (IUPK) scheme that has been given by the Indonesian government, that will allow the company to resume concentrate exports.

At the same time, Freeport Indonesia is granted an opportunity to carry on negotiation with the Indonesian government to discuss terms and conditions related with the temporary IUPK until October 10, 2017.

The deal agreed on Monday means that the agreement has been reached earlier than target.

During the negotiation, the Contract of Works held by Freeport Indonesia wass still honored until agreement is reached related with investment stability.

Under the previous Contract, Freeport claimed to have made $12 billion of investment and is undertaking $15 billion of ongoing capital investment to develop our underground resources. It has developed a business with a workforce of 32,000 Indonesians.

On Feb 17, the Ministry of Energy and Mineral Resources (ESDM) issued export permit recommendation to PT Freeport Indonesia (PTFI).

The energy ministry gives approval to Freeport Indonesia to export 1,113,105 Wet Metric Tonnes (WMT) of copper concentrates starting from Feb. 17, 2017 until Feb. 16, 2018.

On Jan. 12, 2017, the Indonesian government issue Government Regulation (PP) No. 1, 2017 on mineral exports relaxation.

Based on the revised ruling, the government encourages the holders of Contract of Works (CoWs) to change the CoW to IUPK. If the company declined to change the Contract of Work to IUPK, the miner will not be given extension of mineral export permit. If it agrees to change the CoW to IUPK, it may export ores or concentrates with certain conditions.

However, Freeport also demands assurance from the government, including an assurance on the contract extension of 20 years to 2041. The existing contract will expire in 2021.

Freeport has said it is committed to build smelter as mandated by the government once its contract is extended. (*)


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