Indonesia and Freeport-McMoRan have reached a deal which will enable Freeport to keep operating its giant Grasberg copper mine in Indonesia’s Papua province. The deal was reached this week after the US company agreed to sell a majority stake in the operation to Indonesia.

Freeport has been in talks with Indonesia since late 2009 to work out how to shift to a new permit for Grasberg, the world’s second-biggest copper mine, as mandated in a mining law passed that year.

The company said on Tuesday it had made a “major concession and compromise” in selling a 51% stake in PT Freeport Indonesia (PT-FI), its Indonesian subsidiary.

In a statement Freeport said the parties have reached an understanding on a framework to support PT-FI’s long-term investment plans in Papua. This framework, which will require definitive documentation and Freeport Board and partner approvals, includes the following key terms:

• PT-FI will convert its Contract of Work to a special licence (IUPK), which will provide PT-FI with long-term operating rights through 2041.

• The government will provide certainty of fiscal and legal terms during the term of the IUPK.

• PT-FI will commit to construct a new smelter in Indonesia within five years.

• Freeport will agree to divest its ownership in PT-FI at fair market value so that Indonesia interests own 51% of PT-FI’s shares. The timing and process of divestment is being discussed with the government. The divestment will be structured so that Freeport will retain control over operations and governance of PT-FI.

The company has also agreed to build a second smelter in Indonesia and plans to invest between $17 billion and $20 billion in Grasberg through 2031.

Freeport’s president and CEO Richard C Adkerson said, “We are pleased to announce an agreed framework to support our ongoing operations and investment program in Papua.

“Reaching this understanding on the structure of a mutual agreement is significant and positive for all stakeholders. Important work remains on documenting this agreement and we are committed to completing the documentation as soon as possible during 2017.”

http://ptfi.co.id/en

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