The Indonesian government is awaiting the submission of PT Freeport Indonesia’s request for an early extension of its special mining business permit. The current permit will expire in 2041. “We are currently waiting for Freeport to request an extension,” Minister of Energy and Mineral Resources Arifin Tasrif stated on March 17, 2023.
According to Tasrif, a mining company that is integrated with a smelter and still has sufficient reserves may be able to extend their permit based on Indonesian law and regulation. “We will provide convenience based on the regulations if the mine is integrated and as long as he wants to extend (permit),” he said.
Freeport request contract extension: The History
PT Freeport Indonesia (PTFI), as previously reported, is seeking an early extension of its special mining permit. Richard Adkerson, CEO of Freeport-McMoRan Copper & Gold Inc., stated that the company was discussing how to deal with Freeport’s resources after 2041 with President Joko “Jokowi” Widodo and the Indonesian government.
“We are having a discussion with the government on how to deal with that opportunity, since it 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 went on to say that there are many issues to discuss and that both parties are looking into what can be done. The PTFI signed a 30-year Contract of Work (CoW) in 1976, which was supposed to expire in 1997. PTFI discovered a larger gold reserve at the Grasberg mine before the contract expired, prompting the company to request a second contract extension in 1991. This second contract includes a clause requiring the company to divest 51% of its shares to the Indonesian government.
Following lengthy negotiations, Freeport-McMoRan announced in 2018 that it would divest its ownership in PTFI, allowing Indonesia to own 51% of the company. In exchange, the CoW was replaced by a Special Mining Business License (IUPK) with mining rights until 2041 and the requirement that Freeport build a new smelter by 2022.
The Grasberg mine has three mining operations: open pit, underground Deep Ore Zone mine, and underground Big Gossan mine. According to Ignasius Jonan, former Minister of Energy and Natural Resources, the Grasberg gold mine has 23.2 million ounces of gold reserves as of December 31, 2017.
Violation of mineral and coal law
According to Ahmad Redi, a mining law expert, the extension of a special mining business permit can only be granted at least 5 years before the permit expires, with the longest being 6 months. “It would be a violation of mineral and coal law if the government granted the permit tens of years before the expiration date,” he said.
According to Redi, the Indonesian government always bows down and obeys whatever Freeports want, including the previous extension of a 20-year permit in exchange for a 51% stake divestment in 2016. “Several times, the government violated mineral and coal laws in order to facilitate Freeport interest. The government never considers the fact that a special mining business permit can only be extended for 5 years before it expires “He went on to say.