PT Freeport Indonesia (PTFI) aims to secure a contract extension for its operations at the Grasberg mine in Timika, Papua, this year to enable the company to execute its expansion plans.
The company’s newly appointed president director, Rozik B. Soetjipto, said it would be in PTFI’s best interests to secure a deal with the government of Indonesia concerning the future of the Grasberg mine by the end of the year or early 2013 at the latest.
“We need certainty over the future of our contract because between 2013 and 2019, we’ll start pouring in investments for the expansion of underground mining at our site,” he told The Jakarta Post during a media visit session at the Post’s office in Jakarta on Monday.
The company has projected that it needs between US$16 billion and $18.5 billion to expand underground mining between now and 2041. The peak investment period will be from 2017 to 2018. Currently, 25 percent of all mining activities at Grasberg are underground.
The existing contract, a second generation contract signed in 1991, will expire in 2021. The first generation contract was signed in 1967.
As widely reported, the government is now renegotiating all mineral and coal mining contracts in the country so as to be in line with the 2009 Minerals and Coal Law.
The Energy and Mineral Resources Ministry said recently that as many as 60 coal contracts-of-work (PKP2B) and nine non-coal mining license (KK) holders had agreed to renegotiate their contracts with the government.
There are six main issues being discussed in the renegotiation: the size of mining areas, contract extensions, the amount of royalties to be paid, obligations to process raw materials in Indonesia, divestment and the utilization of local goods and services.
Speaking about the renegotiation process, Rozik reported that his company had sent a letter to the government’s renegotiation team, led by Coordinating Economic Minister Hatta Rajasa, expressing PTFI’s readiness to sit together and discuss the amendment of the contract.
“We have already prepared our stances on each issue, but we can’t disclose them now as the formal negotiation process with the government has not been started,” he explained.
The 2009 law, for example, mandates that the size of any one mining area must be limited to only 25,000 hectares for minerals and 15,000 hectares for coal.
On that issue, Rozik said he hoped that the government would consider providing other options for a company like PTFI which had a total area of more than 25,000 hectares and had made comprehensive development plans for decades.
PTFI holds concessions for a total area of 177,000 hectares.
During the visit, PTFI also reported that the company’s operation at Grasberg was still halted following a clash between workers who joined the year’s strike and those who did not join.
“We hope we can finalize dialogue with workers and resume operations this week. We hope there will be no damage to our production facilities,” Rozik said.
Last year, when PTFI was forced to stop operations due to a massive strike by workers, the government lost an estimated $8 million per day from the company revenue.
According to the company’s data, last year, its production fell to 166,133 tons of ore per day which was then processed into 4,859 tons of concentrate. In 2010, the company produced 225,895 tons of ore and 7,055 tons of concentrate.
Meanwhile, a labor union said that workers at the Grasberg mine resisted the company’s move to resume production Monday, a week after operations were halted.
“The management has contacted some workers, asking them to return to work today,” Virgo Solossa, head of organizational affairs at PT Freeport Indonesia’s labor union, told Bloomberg. “We will resist that without an official letter or memo from the company clarifying the situation.”