Indonesia Will Revise Government Regulation for Freeport to Extend Contract Sooner

FREEPORT-JAKARTA. The Ministry of Energy and Mineral Resources (ESDM) will revise the Government Regulation (PP) to pave the way for PT Freeport Indonesia (PTFI) to obtain a contract extension more quickly. 

In PP 96 of 2021 Article 109 Paragraph (5) the extension of the Production Operation activity period for Metal Mineral and Coal Mining is proposed to the Minister at least 5 years or at the latest 1 year before the end of the Production Operation activity period. 

Now, PTFI's mining permit will only expire in 2041, so referring to PP 96/2021, Freeport should only be able to apply for a permit extension in 2036 or at the latest 2040. However, with the revision of the PP, Freeport can obtain an extension of the Special Mining Business Permit (IUPK) 20 years more until 2061 more quickly. 

This PP revision coincides after President Joko Widodo met with Freeport Mc-Moran Inc. (FCX) Chairman and CEO Richard Adkreson in Washington DC, USA recently. In that meeting, the Indonesian president gave his blessing for the certainty of the extension of PTFI's mining permit for 20 years last November. 

The Minister of Energy and Mineral Resources (ESDM), Arifin Tasrif stated that this contract extension is given as certainty for further management of the abundant mineral potential in Grasberg, Papua. Thus, the Indonesian government can also reap additional benefits. 

“We are in the process, there is (revision) PP still being harmonized,” he said at the Ministry of ESDM, Friday (1/12). 

In line with the granting of a faster contract extension, the government also asked for PTFI's commitment to build a smelter in Fakfak, Papua. 

“Yes, this is the case for Freeport. later we can refer to others if it can provide additional benefits for the country. Later, additional smelters will be built, then the government's portion is larger and the obligation for downstreaming,” he explained. 

In the notes of Kontan.co.id,  The Secretary General of the Ministry of ESDM Dadan Kusdiana conveyed the extension of PTFI until 2061 is urgent to ensure investment certainty. 

“Where the requirements are an additional 10% share to SOEs and new investments both in exploration and downstream (smelter),” he said on Monday (20/11). 

Regarding the smelter investment in Fakfak, Dadan stated that the investment value will still be feasibility tested. Clearly, the construction of a new smelter in Papua is part of the commitment to extend the contract after 2041. 

“However, the construction of the smelter must also take into account the adequacy of Freeport's copper ore production," he concluded. 

Meanwhile, PTFI's VP of Corporate Communications Katri Krisnati confirmed that the permit extension process is still being discussed. 

"Currently, everything is still in the process stage for the extension of PTFI's IUPK," Katri explained to Kontan, Monday (20/11).