Indonesia’s Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan has been in the US this week and took the opportunity to meet with Freeport McMoran Inc’s CEO Richard Adkerson. The discussions centred on the future of Freeport’s Grasberg Copper Project in Indonesia, including the extension of the operation until 2031.
ESDM’s secretary general Teguh Pamudji said in a statement that before his departure the Minister had been fully updated by the government negotiation team on the latest developments related to Freeport’s change of operational licence from Contract of Work to Special Mining Business Licence (IUPK) in anticipation of his talks with Mr Adkerson in Houston.”
A statement from the Indonesian Mining Association said: “Teguh, who is leading the talks with PT Freeport Indonesia, explained the four negotiation points - 1 extension of its operations; 2 investment stability; 3 divestment of 51% of Freeport shares; and 4 the construction of a smelter.
“Of the four points, ESDM is in charge of matters dealing with the extension of Freeport’s operation and the construction of a smelter, while other matters concerning divestment of shares and investment stability will be handled by the Finance Ministry.
“Two of the points ESDM was responsible to discuss have already been agreed with Freeport - the extension of the operation until 2031 although Freeport’s demand was until 2041.
“At the beginning stage Freeport was given an extension until 2031 to be ensued with two additional extensions of 10 years each until 2041.”
The statement stated that Freeport said it fully understands this structure and agreed with the extension formula until 2031. Teguh said the 10 years extensions will take effect when Freeport’s contract expires on 2021. “As directed by the Minister we will issue the IUPK until 2022 and then once again until 2031. “Freeport agreed to this,” he said.
Freeport also agreed with the conditions relating to the smelter project in which it will invest US$ 2.1 billion in 2022. Presently, according to ESDM information, Freeport’s smelter has a capacity of 2 million tons of copper concentrate.
Freeport also agreed to build the smelter in Gresik, East Java, which is actually an extension of the existing smelter of PT Smelting of a 1 million tonne concentrate capacity whose construction was disrupted because of negotiations to extend the operation beyond 2021. With regards 51% shares divestment and investment stability, these points will be addressed together with the Finance Ministry.