State-Owned Company Should Take Freeport Indonesia Stake: Minister
OCTOBER 21, 2015
Jakarta. One of two Indonesian government-owned companies, miner Aneka Tambang or aluminium producer Inalum, should buy the stake that Freeport-McMoran's plans to divest in its Indonesian unit, the country's state-owned enterprise minister said.
Freeport Indonesia is looking to divest 10.6 percent of the company as part of the process of extending its contract to operate its huge copper and gold mine in the region of Papua beyond 2021. It must propose the divestment share price to the government this month.
The comments from SOE Minister Rini Soemarno come as ministers have been battling over control of US mining giant Freeport's future in the country, threatening to mar President Joko Widodo's five-day trip to the United States later this month.
"We propose that state-owned enterprises can take the divested share," Soemarno told reporters on Wednesday. "There are two possibilities: Antam and Inalum."
Indonesia's government, which already has a 9.4-percent stake in Freeport Indonesia, will have 90 days to decide on the divestment proposal once it has been received.
Freeport has no issues relating to the proposed divestment as long as it has a "legal basis and a clear mechanism", said company spokesman Riza Pratama. The US miner would prefer to make the divestment through an initial public offering, he added.
An IPO has previously been backed by Indonesian mines ministry officials.
Aneka Tambang was willing to take the Freeport Indonesia stake, Chief Executive Tedy Badrujaman told a parliamentary hearing on Wednesday, although the state-owned nickel miner would need help from financial institutions to fund the acquisition.
Such discussions had already begun, he added.
Inalum did not immediately respond to requests for comment.
Ahead of Widodo's first trip to the United States next week, ambassador Robert Blake told reporters on Wednesday that Freeport was not actually seeking a contract extension, but instead wanted assurances that when its current contract expires, it would be extended.
"Freeport is ready to start investing in the underground mine in Papua but of course they need some assurances that their contract will be extended so they can recoup some of their investment," said Blake, speaking in Jakarta.
Earlier this month, Indonesian government officials said they planned to amend rules on mining contract renewals by the end of the year, which would allow companies to propose an extension 10 years before their contracts expire.
Present rules only allows talks on an extension to start two years before a contract is due to end.