The decision to award the extension of PT Freeport Indonesia special mining business permit after 2041 will not be delegated to next Indonesian government, a Cabinet minister says.
Minister of Investment/Head of Investment Coordinating Board Bahlil Lahadalia said in Jakarta on Monday, March 18, 2024, that the extension of the special mining business permit for Freeport will be decided by the current government of President Joko Widodo.
“My feeling is, In shaa Allah [God willing], it will be decided by this government,” Bahlil said, while dismissing speculations that the permit will be decided by the new government.
Based on quick count results and provisional results of the official real count system, the State leadership candidates pair of Prabowo Subianto-Gibran Rakabuming Raka is leading, with around 58 percent of the votes. The new elected government will be inaugurated on October 20, 2024.
PTFI signed the Contract of Work (CoW) in 1976 for 30 years and should have ended in 1997. Before the contract expired, PTFI discovered a bigger gold reserve at Grasberg mine. The company then submitted a second contract extension in 1991. The second contract has a clausal on divestment of 51 percent of the company’s shares to the Indonesian government.
After a long negotiation, in 2018, Freeport-McMoRan announced that it divested its ownership in PTFI so that Indonesia could own 51 percent shares of the company. In return, the CoW was replaced by a Special Mining Business License (IUPK) with the mining right to 2041 and Freeport will build a new smelter by 2022.
Grasberg mine has three mining operations: Open pit, the Deep Ore Zone underground mine and the Big Gossan underground mine. According to former Minister of Energy and Natural Resources, Ignasius Jonan, the Grasberg gold mine has 23.2 million ounces of gold reserves per December 31, 2017.
Bahlil said last week, there was a limited cabinet meeting on the revision of Government Regulation No. 96/2021. One point of revision being discussed is about the timeline to award permit extension. The current regulation stipulates that the permit extension can only be given 5 years before the permit expires.
The government, Bahlil said, will abolish this provision for mining company integrated with smelter. The government also consider early certainty for Freeport.
“If the extension can only be given 5 years before expiration date, Freeport’s production will start to decline in 2035. At the same time, Freeport has to carry out
underground exploration. Underground exploration takes a minimum of 10 years. So if we have to wait until 2035 to give extension, there will be a vacuum of approximately 5 to 10 years. Who will pay for the maintenance?” Bahlil asked.
Along with the extension, Bahlil said, there is a potential that Indonesia’s share in PT Freeport Indonesia will increase from 51 percent currently to 61 percent in the future.
It means that Freeport will no longer belong to foreign entity but Indonesia’s. “So, how come it is difficult for us to extend the permit for ourselves? How come it is so difficult?” he added.
Bahlil said the government will speed up the decision for the revision of Government Regulation No. 96/2021. We make adjustment, accelerate the process in order to provide certainty of sustainable invesment. Moreover it is big investment,” he concluded.
