Indonesia’s Mining Minister Sudirman Said (2nd from left), Industry Minister Saleh Husin (3rd from left) and National Development Planning Minister Sofyan Djalil (left) listen to Freeport Indonesia’s vice president Wahyu Sunyoto during a visit to Grasberg copper and gold mine complex near Timika, in the eastern province of Papua. The US firm should significantly increase the amount it pays in royalty payments to the Indonesian government if it wants to extend a contract to operate one of the world’s biggest copper mines, a minister said yesterday.
Reuters
Jakarta
Freeport-McMoRan should significantly increase the amount it pays in royalty payments to the Indonesian government if it wants to extend a contract to operate one of the world’s biggest copper mines, a cabinet minister said yesterday.
The US firm last week said it received assurances from Indonesian mining minister Sudirman Said that Freeport’s contract for its giant Grasberg copper and gold mine would be extended beyond 2021.
But comments this week from Said’s boss, chief natural resources minister Rizal Ramli, have raised questions as to whether contract renegotiations between Freeport and the Indonesian government will be that straightforward.
Ramli, who oversees mining and energy, sharply criticised Freeport’s history in Indonesia, telling parliament that the government had not shared enough in the company’s profits over the past few decades.
“It is time to rewrite our history,” Ramli said. “(Freeport) has to pay 6-7% royalty.”
“If Indonesia’s government shows its persistence and it won’t easily be lobbied by Freeport, I think that Freeport will give up in the negotiation process and follow what we want.”
Freeport agreed in July 2014 to start paying 4% in royalties on copper sales, up from 1.5-3.5% previously.
Freeport spokesman Riza Pratama said a royalty payment increase was one of the issues being discussed with the government.
“(The mines ministry) and Freeport are working hard to finalise the contract extension,” Pratama said. Freeport, the biggest listed US copper producer and one of Indonesia’s largest taxpayers, has been trying for years to obtain a contract extension but the government says legally it cannot start talks until 2019. An Indonesian government official said on Friday it planned to amend rules on mining contracts by the end of this year, allowing Freeport to apply for an extension immediately.
Freeport plans to invest $18bn 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.
