Govt Extends MoU on Contract Renegotiation with Freeport

 
Robert Sidauruk, Kartini L Makmur
 
The government has finally decide to extend the Memorandum of Understanding (MoU) with PT Freeport on the mining contract renegotiation between them. The MoU expired last Friday on 24 January 2015, following a failure by both parties to reach consensus on establishing a smelter and the government’s share of the profit sharing agreement.
 
R Sukhyar, Director General of Minerals and Coal at the Ministry of Energy and Mineral Resources, said that the government had proposed a new clause on the mandatory establishment of a smelter by Freeport in the Papua region. Additionally, the government is also calling for a larger portion on the profit sharing scheme. Until now, the government’s share of the profit sharing scheme has been 40%..
 
“We agreed to extend the MoU, however, we are still discussing the duration of the extension,“ said Mr. Sukhyar after a meeting with Freeport’s representatives in Jakarta last Friday.
 
During the meeting, the government emphasized that establishing smelter facilities in Papua is mandatory if Freeport wants to continue its underground mining activities at the Big Gossan, DOZ, and Grasberg mining sites. Mr. Sukhyar added that the government will only extend Freeport’s export permit if the company can show some progress in the establishment of the smelters.
 
“The establishment of a smelter in Papua will improve the welfare of surrounding communities,” said. Mr Sukhyar.
 
In response to the request to contribute more the local community in Papua, Maroef Sjamsoeddinn, Freeport’s President Director explained that the company has drafted a long term plan for development in Papua.
 
These contributions will be realized through several developments in Papua and providing increased income for the state. Although agreeing to make a bigger contribution to the Papuan community, Mr. Sjamsoeddin said that it may take some time to realize a smelter in Papua.
 
“We are committed to contributing to Papua, including establishing a smelter in the region, but this will surely take time,” said Mr. Sjamsoeddin who also served as Deputy Chief of the National Intelligence Agency (BIN) from 2011 to 2014.
 
As background information, the first phase of the MoU on mining contract renegotiation between the government and Freeport commenced in March 2014. During the renegotiation process, Freeport agreed to six requirements proposed by the government, one of which is to establish their own smelter.
 
To realize the development of the smelter, Freeport has entered a MoU with PT Petrokimia Gresik to establish a smelter in East Java. Freeport has agreed to lease 60 hectares of PT Petrokimia Gresik’s land to build a 500 thousandtoncoppercathode smelter at an investment cost of USD 2.3 billion.
 
(hot/kc)