TEMPO.CO, Jakarta - U.S.-based mining giant Freeport-McMoRan says it will not take the Indonesian government to international arbitration over contract row. Freeport CEO Richard Adkerson said that arbitration would not be needed as the two parties have agreed to further negotiate Freeport’s mining operations in Papua.
Richard said yesterday, May 4, at the Energy and Mineral Resources Ministry building that both parties are seeking a win-win solution.
He also expressed his gratitude to the Indonesian government for the negotiation. The company expects to continue its operations until 2041.
Earlier in February, Richard said that Freeport would take the Indonesian government to international arbitration as the latter refuse to grant an export recommendation. Moreover, Energy Ministry Ignasius Jonan had insisted that Freeport changes its contract status from contract of work (CoW) to a special business mining permit (IUPK) to resume exports. The company was also required to comply with the fiscal rules and build a copper smelter.
The government has also softened its stance of late. Jonan has revised the regulations, allowing Freeport to temporarily hold an IUPK and CoW. He also allows the company to exports its mineral concentrates since late April.
The government and Freeport will today start negotiating the change of status from CoW to IUPK. The negotiation will take five months. Also participating in the negotiation are the Home Affairs Ministry, the Finance Ministry, the Attorney General’s Office, the Investment Coordinating Board (BKPM), Papua local government, Mimika district administration and the association of indigenous people of Kamoro and Amungme.
Four topics will be discussed in the negotiation: fiscal provisions, divestment requirements, mining operations post-CoW termination and the requirement to build a smelter. Energy Ministry secretary-general Mochamad Teguh Pamuji said that the Energy Minister insists that the four subjects of negotiation must all be adopted.
As of now, Freeport has not yet agreed on 51 percent divestment. The previous agreement holds that the company would only have to divest 30 percent of its stake. Moreover, both parties have not reached an agreement on the method to calculate the company’s assets. The government expects Freeport not to calculate mineral reserves up until 2041.
The company also refuses to comply with the prevailing fiscal regulations instead of a nailed down fiscal regime set in the CoW.
Richards said the prevailing fiscal regulations would hamper its plan to resume smelter construction in Gresik, East Java, which so far is only 14 percent complete.
However, both the government and Freeport declined to divulge further details regarding possible actions to be taken should the negotiation failed. “We will take about it later when the negotiation timeframe’s ends,” Teguh said.
DESTRIANITA | ROBBY IRFANY
https://koran.tempo.co/konten/2017/05/05/416315/Freeport-Cabut-Ancaman-Arbitrase
