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Freeport’s future remains uncertain

Friday, October 9th 2015. | Miscellaneous

Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Fri, October 09 2015, 5:21 PM

Giant copper and gold mine corporation PT Freeport Indonesia has still not secured assurances of the future of its operations at Grasberg mine, Papua, although the company has renewed its commitment to continue investment in the country.

Recently, Freeport renewed its investment commitment in an agreement with the Energy and Mineral Resources Ministry.

“Freeport has made a high-level agreement to move forward with its investment plans without waiting for the revised regulations we are currently working on. Only after the revision process is completed will the company apply for the extension of its operation,” he said, adding that the agreement was made with the consent of President Joko “Jokowi” Widodo.

Sudirman was referring to the planned revision of a government regulation that stipulates that a request for a mining operation extension can only be submitted two years before the existing permit is set to expire.

The ministry is planning to extend it to 10 years. The extension aims to give certainty to companies long before a permit expires, to allow companies to be more committed to their investment.

Freeport Indonesia, a subsidiary of US-based Freeport McMoRan Inc., has a contract of work that will expire in 2021. Under existing regulations, any request for extension of operations can only be made in 2019, when Jokowi is set to leave office.

Freeport, however, has been trying to obtain assurances of the continuation of its operation in Grasberg, which is the largest gold mine in the world. Such certainty will safeguard massive investment in underground mining of around US$18 billion and a smelter development of about $2 billion.

The situation is complicated as some sections of the public and several politicians have called on the government not to grant Freeport a new permit, as they claim it has only exploited Papuan soil since 1967.

Even with the so-called “high-level agreement”, the future of Freeport Indonesia’s operation remains uncertain as the agreement is most likely only informal, according to international law expert Hikmahanto Juwono.

“The so-called high-level agreement isn’t actually known and is likely similar to a gentlemen’s agreement. It is morally binding. However, the government has to be careful with such an agreement because the company could use it in international arbitration,” Hikmahanto said.

According to Hikmahanto, Freeport could challenge the government through international arbitration if the government ultimately decides not to extend the company’s operations after 2021, while its investments have been disbursed.

“The government can no longer make policies without public opposition like the Soeharato’s years. Now we have people who closely monitor any policies,” he said.

Meanwhile, Energy and Mineral Resources Ministry’s mineral and coal director general, Bambang Gatot Ariyono, said the “high-level agreement” wouldn’t be referred to in the planned amendment of Freeport Indonesia’s contract of work.

“If the company believes in the government, please do,” Bambang said.

The government is currently struggling to adjust numerous contract of works held by mineral and coal mining companies. The adjustments, as mandated by the 2009 Mining Law, are seen as necessary as the government is seeking bigger benefits for its people from the mining activities from now until the expiry of the contracts.

The 2009 Mining Law will only honor contract of works until their expiry dates because it aims to change the “contract regime” into a “license regime”, which gives the government more power.

Among points adjusted in the contract of work renegotiation is the operation continuity under a license regime. – See more at: http://www.thejakartapost.com/news/2015/10/09/freeport-s-future-remains-uncertain.html#sthash.K4IbGuuR.dpuf

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