Freeport Indonesia to Submit Appeal Following Export Ban

TEMPO.CO, Jakarta - The U.S. mining company Freeport-McMoran Inc is considering to take legal actions against the Indonesian government after the company failed to obtain the permit of copper concentrate export on January 25, 2017.

Based on the previous contract, Contract of Work (CoW), PT Freeport Indonesia had obtained the rights to exporting unrestricted amount of copper concentrate and was not obligated to pay an export fee. On Wednesday, January 25, 2017, the company released an official statement through their website; “If [we] fail to reach an agreement with the Indonesian government, Freeport Indonesia has considered taking legal action in order to uphold the contract agreement, if necessary.”

Previously on January 11, 2017, President Joko “Jokowi” Widodo ratified Government Regulation (PP) No. 1/2014 on the Fourth Amendment on Government Regulation No. 23/2010 regarding the Implementation of Mineral and Coal Business Activities (PP Minerba).

The PP Minerba regulates contracted companies to refine their minerals in Indonesia. The companies will be banned if they don not build a smelter in Indonesia. In order to continue conducting exports, their contract status must be changed into a Special Mining Business Permit (IUPK). Therefore, Freeport would be obligated to sell 51 percent of their shares to Indonesia this year.

Freeport management has also informed the Indonesian government on their plan to cut production. The company will adjust the production capacity of their business unit, PT Smelting, which is worth 40 percent of Freeport Indonesia’s production capacity.

Based on that scenario, Freeport Indonesia will cut down the number of their workers to significantly reduce their cost expenses and also delaying their underground mining and smelter investment project plans.

“[Current] work contract will be valid until it’s replaced by a new alternative agreement that is profitable for both sides,” Freeport stated.

Recently, Freeport Indonesia lost a lawsuit against Papua’s Provincial Government. Following a series of court sessions held since December 2015, Jakarta’s Court Judge finally read the verdict of Freeport Indonesia’s surface water tax dispute on January 18, 2017, where they rejected the appeal submitted by PT Freeport.

Papua regional government issued a statement mentioning that the total value of the dispute reached Rp2.5 trillion for the tax period throughout 2011-2014 and January-July 2015.

Freeport management stated that they are obliged to pay the tax value that is worth US$376 million, which also includes the US$227 million fine or around Rp5.01 trillion. According to the company, they have the right to submit an appeal against their tax liabilities to the High Court as mentioned in their work contract. Under Indonesian law, the tax payments must be paid within 30 days after the verdict.

According to their financial report, Freeport Indonesia will appeal to the verdict.

ABDUL MALIK