TEMPO.CO, Ambon - The Indonesian government confirmed that they will issue a special mining business permit (IUPK) for PT Freeport Indonesia (PTFI). This issuance is an attempt to provide an investment-linked assurance. “I will sign the IUPK [today]. It’s fixed,” said the Energy and Mineral Resources (ESDM) Minister Ignasius Jonan on Thursday, February 9, 2017.
Jonan was reluctant in revealing the details of the IUPK which replaces the previous Contract of Work (CoW). The issuance will provide an investment assurance for PT Freeport Indonesia which is currently experiencing a hurdle in exporting their products.
However, the company’s VP Corporate Communication, Riza Pratama, admits that PTFI has yet to receive any form of assurance related to the issuance of the IUPK. Despite this, he says that PTFI is committed to shifting its status.
“We don't know what the IUPK physically looks like, the government hasn’t been put forth. We are committed to a number of requirements,” Riza Pratama said after attending the meeting with the House’s VII Commission.
The requirement offered by PTFI includes a legal and fiscal certainty which will be a long-term guarantee for the company's operations, considering that there are a number of differences between the CoW and the IUPK.
The Freeport Indonesia VP Corporate Communication explained that the company would like to maintain the requirement that provides an assurance for its business venture, as it is contained in the previous CoW, in the IUPK.
“The Contract of Work contains a number of certainties, investment wise. Such as the nailed down legal and tax [certainty],” says Riza.
Since January 12, 2017, PTFI is not able to export its copper concentrate. Instead of facing a concentrate stockpiling, the company plans to reduce its total production since PT Smelting could only absorb 40 percent of PTFI’s production. Related to that matter, there are three main issues that they plan to handle; security, workers, and communication problems.
From those three, worker reduction would become the most crucial problem emerging from PTFI’s production halt. PT Freeport Indonesia currently employs 32,000 people. The company would also stop their logistical expenses from 70 percent of its domestic suppliers.
Riza also revealed that no deals were made related to divestments at the meeting. In the previous provision, PTFI’s divestment is only 30 percent, but now it’s been assigned by state officials to a 51 percent divestment.
Government Regulation No. 1/2017 and Energy Minister Regulation No. 5/2017 state that mining permit (IUP) and special mining permit (IUPK) holders are the only two that can receive an export relaxation on concentrate, ore, and bauxite export for the next five years.
The export relaxation has a number of prearrangements contained in it; one of it is if the company has established or is in the process of building a smelter.
The House’s VII Commission member, Dito Ganinduto, stated that PTFI reported in the meeting that their concentrate had already stockpiled. Dito suggested that PTFI and the government should reach a deal together to overcome the problems caused by the halted export.
Executive Director of the Indonesian Mineral Entrepreneurs Association, Ladjiman Damanik, suggests that the government must compromise and must issue a temporary export permit even though the IUPK has not been issued.
He views that the move can dodge the negative effects of PTFI’s production halt. He suggested.
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