Indonesia aims by the end of this year to allow mining firms to apply earlier for licence extensions in a move expected to provide more certainty for businesses, as the government seeks to deregulate a number of policies to spur economic growth.
Such a move would allow US miner Freeport-McMoRanInc to apply for an extension of its contract at the Grasberg copper and gold mine in the eastern province of Papua.
Freeport has for years been seeking contract certainty from the Indonesian government. Its existing mining contract ends in 2021, but present rules only allows talks on an extension to start two years before a contract is due to end.
Energy and Mineral Resources Minister Sudirman Said revealed that the proposal would allow hard-mineral miners to submit licence extension proposals 10 years prior to their expiry, from a previous limit of two years. Non-metal mineral mining firms could apply for licence extension five years prior to expiry.
The proposed regulation forms part of President Joko Widodo’s first batch of economic policy packages to address the country’s ongoing economic weakness.
Mines Ministry director general of Coal and Mineral Bambang Gatot said, “A revision to the government regulation on the time of a contract extension proposal is now being processed in the economics ministry. We expect it can be released soon, this year.”
Sudirman said that the existing regulation “doesn’t make sense”. There are a number of contracts that will expire in the next 10 years, and thus they will have the opportunity to submit requests for licence extension as soon as possible, citing Newmont Nusa Tenggara, Freeport Indonesia, Vale Indonesia and Karimun Granit.
Because of their high risks and large investments, early licence extension could provide certainty for the businesses to lay out financial plans for their operations to extend their presence here, he said.
Freeport said recently that it had been assured by the Indonesian government that the contract for its Grasberg mine would be extended beyond 2021.
Freeport plans to invest $18 billion to transition the Grasberg complex from an open pit to underground mining in late 2017. The company currently produces about 220,000 tonnes of copper ore per day, which is then converted to copper concentrate.
The contract extension move comes after the US miner previously reached agreements on higher royalties, an export tax and domestic processing and divestment.
The government has been rolling out new measures to re-energise South East Asia’s largest economy after growth cooled in the second quarter to 4.67%, the slowest pace in six years. President Joko Widodo has shown signs that the government is trying to mend fences with wary investors following a series of nationalistic policies by the previous administration.