TEMPO.CO, Jakarta - The government insists that Freeport Indonesia divest 51 percent of its stake, said Energy and Mineral Resources secretary general Teguh Pamudji. He stressed that the government will not back down despite Freeport wishing to reduce the figure to 30 percent.

The government has told Freeport, holder of a special mining permit (IUPK), to carry out gradual divestment of its stake. Government Regulation No. 1/2017 holds that the government reserves the right to buy 51 percent of stake in the tenth year of operations of a company.
The composition of the shareholder will include the central and local governments.

Finance Minister Sri Mulyani said that the requirement to divest 51 percent of stake is already contained in the contract of work held by Freeport.

Read: Sri Mulyani Warns Freeport Indonesia over Contract Negotiation

Sri underlined that the government will be fighting hard in the negotiation of divestment process. "We are prepared to negotiate until an agreement is reached. Thereafter, we will talk about the composition, when, who would be potential buyers and the arrangement."

Freeport Indonesia spokesman Riza Pratama said that the company is mulling divestment through an initial public offering (IPO) at the Indonesia Stock Exchange (IDX).
The most important issue for Freeport is to secure operating permit extension to 2041, Riza added. The extension would allow the company to resume US$15 billion investment in underground mining and smelter construction that will cost US$2.3 billion.

State-Owned Enterprises Deputy for Mining Business Fajar Harry Sampurno said that the government is not keen on an IPO at the capital market due to past experience.

Read: Freeport to Issue New Shares for Divestment Requirement

In its first contract extension in 1991, Freeport disposed of 9.36 percent of stake with PT Indocopper Investama being the buyer. The company then delisted from the stock market. "The shares were repurchased by Freeport. We don’t want to experience it again," Fajar said.

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