Govt released new rules to ‘conquer’ Freeport

JAKARTA. Government finally released Government Regulation No 1/2017 on Mineral and Coal, as well as two Ministers of Energy and Mineral Resources (ESDM) Regulations. Those regulations become law umbrellas for mineral and coal mining, as well as crude mineral exports and the requirements for processing and refining minerals.

Minister of ESDM Ignasius Jonan said that the regulations aim at allowing mining companies to export crude minerals, in one condition: the companies have to change the status of contract of work to Special Mining License (IUPK). “No more negotiation,” said Jonan.

Jonan also confirmed that the regulations do not contradict with Law No 4/2009 on Minerals and Coal. In this case, the law stipulates that contract of work has time limitation for exporting crude minerals, while IUPK has no time limitation.

Aside of export provisions, Government Regulation No 1/2017 also stipulates divestment of foreign-owned mining company. The previous regulation required the foreigners to divest only 20% of their shares after five years operation. The percentage of the shares divestment also varies and is calculated based on the type of mineral and the portions of mineral down streaming fulfillment.

The regulation also requires all foreign-owned mining companies to divest 51% of their shares in a gradual manner, starting from the sixth year to the tenth year of operation.

A foreign-owned mining company PT Freeport Indonesia previously had divested 10% of its shares to the Government of Indonesia. Therefore, this company is still required to divest 41% more of its shares in the future.

Aside of export and divestment provisions, the new regulation has almost no significant changes. Not surprisingly, some have perceived that apparently the government is trying to ‘conquer’ Freeport.

Understandably, to date the government apparently has been struggling to revise Freeport’s contract of work. Therefore, the new regulation will bring direct consequence to Freeport.

First, Freeport has to change its contract of work to IUPK to export crude minerals. Second, Freeport has divest 41% more of its shares.

Management of Freeport adapt passive stance in responding the new regulation. “We will continue the cooperation with Indonesian government to ensure that our activities will not be interrupted,” said the spokesman of Freeport Indonesia Riza Pratama.

Meanwhile, Development Director of PT Indoferro Jonatan Handjojo protests the policy. According to Jonatan, the new policy will deteriorate nickel price, while smelters will be difficult to collect raw materials. “All of nickel smelters are furious,” he said.

Chairman of Indonesian Mining Institute (IMI) Irwandy Arif questioned this new policy, on the grounds that Constitutional Court had decided that the miners are no more allowed to export the minerals.

(Muhammad Farid/Translator)