Nuggets of wisdom: The
country’s largest copper and gold miner PT Freeport Indonesia, owned by
US firm Freeport-McMoran Cooper & Gold Inc., says that it prefers
to sell its stake to the government rather than to the public in order
to meet its diversity requirement.Reuters
Indonesia’s biggest copper and gold miner, PT Freeport Indonesia, says an initial public offering (IPO) would be the last divestment option as the company prioritizes the ongoing negotiation for share acquisition by the Indonesian government.
“The government is still our priority. We want the involvement of both
the central and regional governments inside Freeport’s management,”
Freeport Indonesia spokesperson Ramdhani Sirait told reporters on
Friday.
Ramdhani said Freeport Indonesia’s parent company,
US-based Freeport McMoran Copper & Gold Inc., had made an offer of
diluting its ownership by 9.36 percent for the interest of allowing more
Indonesian ownership in the company, particularly that of the regional
government.
The 9.36 percent ownership, he said, was offered to
the regional government of Papua so as to allow direct involvement of
both the central and regional governments and to improve transparency.
Ramdhani
said the monetary value of the offered stake would be valued
accordingly to the valuation of Freeport-McMoran listed shares in the
New York Stock Exchange (NYSE).
Freeport Indonesia operates the
Grasberg mine on Papua that holds the largest gold reserves and the
second-largest copper mine in the world. The company is currently 81.28
percent controlled 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.
Unlike other foreign-owned
mining companies, Freeport is exempted from an obligation to divest 51
percent of its stake to local investors, be that the government or the
private sector, as required by the 2009 Minerals and Coal Mining Law.
According
to Freeport-McMoran’s initial Contract of Work (CoW) with the
government signed in 1967, the firm is required to divest its stake in
Freeport Indonesia to the government or to local firms. The contract
does not specify a set percentage of shares to be divested. However,
under the company’s 1991 contract with the government, it was required
to give up a 51 percent stake in Freeport Indonesia by Dec. 30, 2012.
The
1991 contract was nullified by a 1994 government regulation, which
effectively allowed Freeport-McMoran to retain full ownership of the
subsidiary.
Under a government regulation issued in April this
year, mining companies operating in Indonesia under CoW would have to
convert its operating license in to a mining permit, or locally known as
IUP, when their contract expire. The request for IUP must be submitted
no later than six months prior to the expiry of the CoW. Freeport’s
contract will expire in 2021.
Separately on Friday, Freeport
Indonesia president director Rozik B Soetjipto confirmed the company was
in negotiation with the government. The points of negotiations, he
said, include: certainty for the extension of contract, the size of
mining areas, revision to the amount of royalty paid to the government,
obligations to process raw material in Indonesia, the utilization of
local goods and services, as well as the divestment
The
government previously said that a team led by Coordinating Economic
Minister Hatta Rajasa had been set up for the negotiation with Freeport.
The team’s working period will end in 2013.
The government wants
state owned mining companies, PT Aneka Tambang and PT Bukit Asam, to
take part in the acquisition of shares in Freeport Indonesia.
Shares
in Freeport McMoran was closed at US$35.47 a piece at the NYSE on
Thursday, up by 0.7 percent compared to Tuesday closing.
The stock market closed on Wednesday for national holiday.