Freeport threatened with default

JAKARTA. A government official has threatened mining company PT Freeport Indonesia, a subsidiary of US-based Freeport McMoRan Inc., with default for allegedly stalling the divestment of a stake.

The Energy and Mineral Resources Ministry’s director general for minerals and coal, Bambang Gatot Ariyono, said the company had been warned over delays in offering shares to the government.

The divestment of Freeport’s stake was part of obligations in the renegotiation of the company’s mining contract, Bambang said.

He admitted that Government Regulation (PP) No. 77/2014, which revises PP No. 23/2010 on mineral and coal mining businesses, did not specify a time frame for the share offering.

However, Bambang said, the government had asked Freeport to immediately submit the offering of 10.64 percent of its shares.

“If it does not fulfill the obligation, then it should know that there is a first warning, a second warning and a reprimand, followed by a default,” he said as quoted by kompas.com at the House of Representatives complex in Jakarta on Monday.

According to the government regulation, Freeport should have conveyed its share offering in October, but it has not yet made an offer. The Energy and Mineral Resources Ministry has sent a warning letter to Freeport, asking it to immediately convey its share offering.

Commenting of Freeport’s statement, which said that the company was still waiting for a clear divestment mechanism from the government, Bambang said the government still referred to PP 77.

“Just let them talk whatever they like. I don’t know what they call an [unclear] mechanism. In principle, we still hold onto PP 77,” Bambang said.

Earlier, Freeport spokesperson Riza Pratama said the giant gold and copper miner had not yet submitted its share offering to the government because it was still waiting for a clearer legal construction and mechanism on the share divestment from the government.

When asked what clear mechanism Freeport was expecting, Riza replied: “[We are still] waiting for the law revision,” without elaborating.

Currently, the government owns 9.36 percent of Freeport’s shares. To be in line with regulations, Freeport should have divested to the government a further 10.64 percent of its shares by Oct. 14, 2015, with the central government getting the first offer to buy the shares.

If the central government is not interested, priority is given to state-owned enterprises, then to regional governments and region-owned enterprises, and finally to the private sector. The company has to divest an additional 10 percent of its shares to the government by October 2019.