[Indonesia Report] Freeport Indonesia, world’s largest mine operator, agrees to divest

Freeport Indonesia, operator of Grasberg mine in Papua, that contains the world’s largest recoverable copper reserve and the largest gold reserve, agrees to divest its stake via an Initial Public Offering, Hatta Rajasa, Indonesian’s Coordinating Minister for the Economic, was learned to have told Agence France-Presse (AFP) Monday (July 23).

The Grasberg minerals district includes open pit and underground mines. (Photo: Freeport-McMoRan Copper & Gold Inc.'s website)

“I have asked them (Freeport Indonesia) to divest via an IPO in Indonesia and they agreed,” Rajasa said.

But Rajasa also told that there was no agreement on the percentage of stake that Freeport Indonesia would divest.

Early this year, Indonesian government amended government regulation number 23 of year 2010, concerning the Implementation of Mineral and Coal Mining Business Activities. In the amendment stated in article 97 that foreign-owned mining companies have the obligation to divest its stake gradually since the fifth years of production.

Therefore in its tenth years, 51 percent of its stake should be owned by local investors, means either government or private sector.

This amendment is Indonesian government’s bid to keep a larger portion of revenues from the country’s vast natural resources.

Freeport Indonesia’s president, Rozik Soetjipto, told Jakarta Globe, Indonesian local media, earlier this month, that “The IPO would be good for Freeport Indonesia,” adding that thus it would allow the company to be “more accountable and transparent.”

Freeport Indonesia is currently 81.28 percent owned by Freeport McMoran, 9.36 percent by the Indonesian central government, and 9.36 percent by PT Indocopper Investama, which is entirely owned by the US company.

Freeport Indonesia’s current contract is its second Contract of Work. It was signed in 1991 and is set to expire in 2021.

According to Jakarta Post, FI is planning to extend its contract until 2041.

“Freeport Indonesia is planning to invest US$17 billion for the 2012-2041 period, but we need clarity before we can spend the money,” said Ramdani Sirait, spokesperson of Freeport Indonesia.

Ramdani added that Freeport Indonesia is ready to sit together with the government to discuss the amendment of the contract.

Meidyana Rayana Intern Reporter news@theasian.asia