PT Freeport Indonesia (PTFI) is seeking for an early extension of its special mining permit in Papua when the existing permit expires in 2041. Chief Executive Officer of Freeport-McMoRan Copper & Gold Inc., Richard Adkerson, said the company was having a discussion with President Joko “Jokowi” Widodo and the Indonesian government on how to deal with Freeport’s resources after 2041.
“We are having a discussion with the government on how to deal with that opportunity. The opportunity is significant that will benefit our shareholders,” he told Indonesia Business Post on the sideline of his speech at the University of Indonesia (UI) on October 5, 2022. He added that there were a lot of issues to discuss and both parties are seeing what might be done.
However, Adkerson said that the discussion was still in a preliminary phase and that Jokowi and the government were very cooperative. However, he said that the president did not promise him an earlier contract extension after 2041.
“We had a discussion but there was no promise in my view. It make sense for stakeholders to talk about it,” he added.
Adkerson emphasized that when both parties talked about contract extension, it was not an extension for foreign investors. PTFI is an Indonesian company as the Indonesian government owns 51% of the shares.
“The resource is there and it makes sense for our shareholders to find a way to develop the resources, “he said.
Read also: Government plans to grant Freeport contract extension, export tax reduction
PTFI signed the Contract of Work (CoW) in 1976 for 30 years and should end 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% of the company’s shares to Indonesia government.
After a long negotiation, in 2018, Freeport-McMoRan announced that it divested its ownership in PTFI so that Indonesia could own 51% 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.
Minister denies contract extension talk
However, Investment Minister Bahlil Lahadialia denied the talk, saying the government and Freeport-McMoRan only discussed on the development program until 2041.
“Please, do not mistakenly interpret that. If there is the talk, it is part of what we are jointly thinking about the benefits for the nation and the state and the people, and not for the the interest of certain groups,” he said.
A source had earlier told the Post that the government planned to grant contract extension for PTFI. The source said there had been a cabinet meeting in mid September 2022 to discuss the possibility of granting contract extension for Freeport earlier than scheduled.
Executive Director of Indonesian Resource Studies, Marwan Batubara, said it was too early for the government to grant contract extension for Freeport. As a majority shareholder of the company, the government should be consistent with article 33 of the Constitution. The article stipulates that the land, waters and natural resources within shall be under the powers of the state and shall be used to the greatest benefit of the people.
Mining Law Expert Ahmad Redi said that Indonesia mineral law stipulates that the extension of Freeport permit can only be done at least 5 years before the permit expire.
