Papua, Mimika to Jointly Get 10% of Freeport's Divested Shares

Workers pictured at Freeport Indonesia's Grasberg gold and copper mine in Papua. (Antara Photo/M. Agung Rajasa)

By : Adinda Normala | on 1:47 PM January 13, 2018
Category : Business, Commodities

Jakarta. The central government and the Papua provincial and Mimika district administrations signed an agreement with state-owned mining holding company Inalum on Friday (12/01) to pave the way for the two local governments to jointly acquire a 10 percent stake in Freeport Indonesia.

The government has tasked Inalum with the acquisition of an additional 41.64 percent stake in Freeport Indonesia to gain a controlling interest in the company, currently a subsidiary of United States-based mining giant Freeport-McMoRan.

Inalum currently owns a 9.36 percent stake in Freeport Indonesia.

Freeport Indonesia operates the Grasberg copper and gold mine in Mimika district, Papua.

According to Friday's agreement, Papua province and Mimika district will jointly receive 10 percent of Freeport Indonesia's shares via Inalum. The state-owned mining holding company will fund the entire cost of the acquisition.

Papua and Mimika will establish Papua Divestasi Mandiria, a company controlled by the two regional governments, to manage the shares.

"The stake ownership will benefit the people of Papua and the rest of Indonesia, as it will increase state revenue, sustain downstream [industry], increase value and create new jobs," Finance Minister Sri Mulyani Indrawati said during a press conference.

In a framework agreement in August last year, Freeport Indonesia agreed to divest a 51 percent stake, build copper smelters in Indonesia and pay higher taxes, as part of a deal to extend its contract until 2041.

Freeport's existing contract of work will expire in 2021.

Indonesia also plans to take over Rio Tinto's 40 percent participating interest in Freeport Indonesia as part of the total of 51 percent it plans to acquire.

Papua Governor Lukas Enembe expressed appreciation for the central government's efforts to transfer control over the world's largest gold mine and second largest copper mine to local residents.

"Since Freeport has been operating in Papua, this is the very first time the government puts its trust in the local residents; we are proud of it," Lukas said.

According to Bambang Gatot Ariyono, director general of minerals and coal at the Ministry of Energy and Mineral Resources, the government has set a target to complete its negotiations with Freeport by June this year.

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