Gov’t Mulls Extending Freeport’s Permit for Additional Stake
Jakarta. The Indonesian government is in talks to extend Freeport’s permit as long as the mining giant agrees to give an additional 10 percent stake.
Freeport’s mining permit expires in 2041, and the government today has a 51 percent stake in the company.
According to Investment Minister Bahlil Lahadalia, the government mulls extending the permit in exchange for the additional stake in Freeport.
The miner produces 3 million tons of copper concentrates, 1.3 million of which are processed by a smelter operated by PT Smelting in Gresik, East Java.
Freeport is currently constructing its second smelter in Gresik. The new smelter will have a processing capacity of 1.7 million tons of concentrates. Construction is slated for completion at the end of the year.
"The [copper] concentrates are forecast to run out in 2035. Production will start to drop as reserves begin to dry up. What Freeport is producing today came from mining exploration back in the 1990s. Exploration takes 10-15 years. If we do not extend the permit, Freeport might shut down in 2035-2040,” Bahlil recently told reporters in Jakarta.
“Freeport generates between $1.3 billion and $1.4 billion in dividends. [...] We own 51 percent of the shares. If [Freeport’s] valuation is at $20 billion, that means Indonesia makes a profit of over $10 billion. So why would we kill off this asset?” Bahlil said.
There is also another prerequisite for the contract extension: Freeport has to build a smelter in Papua. Bahlil added, “It is okay to build a smelter in Gresik, but they must build another one in Papua.”
The minister, however, refused to give a timeline nor further details as the negotiations are still ongoing.
“Freeport must agree to this,” he added.