Freeport may get a 20-year contract extension after it ends in 2041

Jakarta – President Joko Widodo (Jokowi) has given the green light for PT Freeport Indonesia (PTFI) to obtain a 20-year mining contract extension in Papua, despite a recent extension until 2041.

With the renewal, Freeport’s mining contract will be valid until 2061. The news was announced on the sidelines of the President’s visit to the US. President Jokowi met with Freeport McMoRan Chairman Ricard Adkerson at the Waldorf Astoria Hotel, Washington, D.C.

President Jokowi said that the extension comes with a condition that Freeport must release 10 per cent of its shares to Indonesia. “I am pleased to hear that the discussion on adding 10 per cent of Freeport’s shares in Indonesia and extending the mining permit for 20 years has reached the final stage,” he said, adding that he hopes the deal can be finalised by the end of November this year and emphasising the urgency of completing the discussions.

Meanwhile, Erick Thohir, interim Coordinating Minister for Maritime Affairs and Investment, explained that Indonesian SOEs currently control 51% of Freeport shares.

Freeport is not only involved in mining gold and copper but also in building smelters to process the mining products. Thohir highlighted this investment as part of the downstream strategy, constructing a smelter in Surabaya. During the meeting, Freeport showed its commitment to building smelters in other locations in Indonesia, including in Fakfak Regency, West Papua Province.

Two conditions for the contract extension

Previously, the Minister of Investment/Head of the Investment Coordinating Board (BKPM), Bahlil Lahadalia, confirmed that PT Freeport Indonesia must fulfil two requirements to extend its contract. The requirement is that PTFI is required to build a new processing and refining facility (smelter) in Papua.

“With the extension, we ask that the smelter be in Papua. Because it also concerns the sovereignty and dignity of the Papuan people,” Lahadalia said. The second condition is an additional 10 per cent divestment of shares that will be handed over to the government through the holding company for mining SOEs, MIND ID. He said that he hopes the share disposal process is carried out at the cheapest possible price.

However, this additional shareholding can only be done after 2041 or after extending the operating licence. Lahadalia set these conditions to ensure a real contribution from PT Freeport Indonesia to development in Papua and to increase government control over strategic natural resources. (Hartatik)

Banner photo: Burley Packwood/Wikimedia Commons

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