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Ada Pertanyaan? Hubungi Kami Ari Pramuditya, Nando Narendra
Freeport's mining site in Papua. Photo by: Freeport Indonesia (www.ptfi.co.id)
Ladjiman Damanik, in his role as the Executive Director of the Indonesian Mineral Businessmen’s Association (Asosiasi Pengusaha Mineral Indonesia – “APEMINDO”), has stated that the government can expedite the takeover of shares from PT Freeport Indonesia (“Freeport”).
According to Daminak, a precedent for such an appropriation was set when the government took over PT Indonesia Asahan Aluminium(“Inalum”) in October of 2013. “The whole process can begin immediately,” Mr. Damanik explained in Jakarta on Saturday 5 December 2015.
Mr. Daminak added that in spite of the fact that Freeport’s Contract of Work (Kontrak Karya – “KK”) remained valid until 2021, the government should nevertheless begin to make preparations for this process now. According to Daminak, the Inalumtakeover offers a good model for the government to follow and can also be applied to the current Freeport situation.
“In the Inalum case, the whole process was already up and running a year prior to the expiration of their work contract. It’s important that we are prepared, so that we are not surprised later and can take over Freeport both cleanly and efficiently,” Mr. Damanik asserted.
With regard to the financing of the whole process, Mr. Damanik stated that it wasn’t necessary for the Indonesian government to become indebted to another country in order to purchase Freeport shares. According to Damanik, the takeover of Freeport’s shares can be covered by the sale of State Commercial Papers (Surat Berharga Negara – “SBN”), such as bonds or other commercial papers.
In line with Mr. Damanik, the Director of Indonesian Resource Studies (“IRESS”), Marwan Batubara, stated that now was the right time for the government to purchase Freeport shares, as they had currently slumped to well below their normal value of around USD 7.8 per share.
Mr. Batubara also explained that Freeport had pledged to pay compensation for the environmental damage that it had caused in Papua. This commitment could be used by the government, Mr. Batubara asserted, in order to purchase Freeport shares.
“Freeport’s commitment to pay compensation for the environmental damage that it has caused must be utilized. Our state could thus purchase Freeport shares without needing to spend any money. Moreover, Freeport shares currently sit well below their normal price, and this could also prove advantageous to the government,” Mr. Batubara explained.
Kardaya Warnika, Chairman of Commission VII at the House of Representatives, believes that the government can also use the takeover of the so-called Mahakam Block as a useful precedent.
During this takeover, there was an option on the table for the management of the Mahakam Block to be handed over to Indonesia’s state-owned enterprises (Badan Usaha Milik Negara – “BUMN”) and regionally owned enterprises (Badan Usaha Milik Daerah – “BUMD”).
This option can also be applied to Freeport, Mr. Warnika believes, and following a BUMN and BUMD takeover, the implementation of Article 33 of the 1945 Constitution can be easily achieved.
Mr. Karnika is confident that investors will still be interested, even with BUMN and BUMD at the helm. “Legally, minerals and coal are easier to deal with, as legally it is simply a matter of licensing. It may also be possible for the private sector to work together with Indonesia’s BUMN and BUMD,” Karnika explained.
Mr. Karnika also asserted that such a proposal did not represent a process of nationalization, as it did not seek to nullify any pre-existing contracts but would instead only be implemented after the existing mining contracts had already expired.
“The KK expires in 2021, while the Mining Law states that the Special Mining License (Izin Usaha Pertambangan Khusus – “IUPK”) is the valid document in this case. So it is entirely up to the host country whether it wishes to grant a license or not. I thus believe that now is the time for Indonesia to organize its national interests for the sake of its own prosperity. We are a state that follows the rule of law and must obey the law. This will be for the best,” Karnika stated.
Freeport began operating in Indonesia on 7 April 1967 after the signing of the first KK. The company’s KKs were then repeatedly extended until a fifth-generation KK was signed on 30 December 1991. This KK remains valid for a period of 30 years and thus expires in 2021. At present, Freeport’s production activities comprise of the Grasberg open-pit mine, the DOZ (Deep Ore Zone) underground mine, and Big Gossan in the Papuan District of Mimika.
Team Creation
The proposal to accelerate the Freeport share takeover will require some serious work from the government however and Mr. Damanik believes that a number of preparations will have to be made in order to start the process efficiently, including the creation of a dedicated team. This team should consist of lawyers and public accountants, as well as members of the government.
The team would require lawyers in order to monitor the legal due diligence process, while the public accountants would audit any financial statements.
“Preparation should get underway now, and a team of lawyers and public accountants should be picked. We will then be able to examine the share price and the company’s bookkeeping efforts. The technical and financial aspects of the takeover will also require a lot of attention. So we will need to get going well in advance of 2021. Leaving things until 2019 will be too late,” Mr. Damanik declared.
Daminak believes that a solid team will be able to smooth the share takeover process and asserted that the members of the team originating from the government should be drawn from the Legal Bureau of the Ministry of Energy and Mineral Resources.
“The team work has to be strong between the lawyer, accountant, and technical-assessment members of the team, and I think that a team consisting of members drawn solely from the Legal Bureau of the Ministry of Energy and Mineral Resources may not be enough to get the job done,” Mr. Daminak concluded.
(sp)
Ari Pramuditya, Nando Narendra
Freeport's mining site in Papua. Photo by: Freeport Indonesia (www.ptfi.co.id)
Ladjiman Damanik, in his role as the Executive Director of the Indonesian Mineral Businessmen’s Association (Asosiasi Pengusaha Mineral Indonesia – “APEMINDO”), has stated that the government can expedite the takeover of shares from PT Freeport Indonesia (“Freeport”).
According to Daminak, a precedent for such an appropriation was set when the government took over PT Indonesia Asahan Aluminium(“Inalum”) in October of 2013. “The whole process can begin immediately,” Mr. Damanik explained in Jakarta on Saturday 5 December 2015.
Mr. Daminak added that in spite of the fact that Freeport’s Contract of Work (Kontrak Karya – “KK”) remained valid until 2021, the government should nevertheless begin to make preparations for this process now. According to Daminak, the Inalumtakeover offers a good model for the government to follow and can also be applied to the current Freeport situation.
“In the Inalum case, the whole process was already up and running a year prior to the expiration of their work contract. It’s important that we are prepared, so that we are not surprised later and can take over Freeport both cleanly and efficiently,” Mr. Damanik asserted.
With regard to the financing of the whole process, Mr. Damanik stated that it wasn’t necessary for the Indonesian government to become indebted to another country in order to purchase Freeport shares. According to Damanik, the takeover of Freeport’s shares can be covered by the sale of State Commercial Papers (Surat Berharga Negara – “SBN”), such as bonds or other commercial papers.
In line with Mr. Damanik, the Director of Indonesian Resource Studies (“IRESS”), Marwan Batubara, stated that now was the right time for the government to purchase Freeport shares, as they had currently slumped to well below their normal value of around USD 7.8 per share.
Mr. Batubara also explained that Freeport had pledged to pay compensation for the environmental damage that it had caused in Papua. This commitment could be used by the government, Mr. Batubara asserted, in order to purchase Freeport shares.
“Freeport’s commitment to pay compensation for the environmental damage that it has caused must be utilized. Our state could thus purchase Freeport shares without needing to spend any money. Moreover, Freeport shares currently sit well below their normal price, and this could also prove advantageous to the government,” Mr. Batubara explained.
Kardaya Warnika, Chairman of Commission VII at the House of Representatives, believes that the government can also use the takeover of the so-called Mahakam Block as a useful precedent.
During this takeover, there was an option on the table for the management of the Mahakam Block to be handed over to Indonesia’s state-owned enterprises (Badan Usaha Milik Negara – “BUMN”) and regionally owned enterprises (Badan Usaha Milik Daerah – “BUMD”).
This option can also be applied to Freeport, Mr. Warnika believes, and following a BUMN and BUMD takeover, the implementation of Article 33 of the 1945 Constitution can be easily achieved.
Mr. Karnika is confident that investors will still be interested, even with BUMN and BUMD at the helm. “Legally, minerals and coal are easier to deal with, as legally it is simply a matter of licensing. It may also be possible for the private sector to work together with Indonesia’s BUMN and BUMD,” Karnika explained.
Mr. Karnika also asserted that such a proposal did not represent a process of nationalization, as it did not seek to nullify any pre-existing contracts but would instead only be implemented after the existing mining contracts had already expired.
“The KK expires in 2021, while the Mining Law states that the Special Mining License (Izin Usaha Pertambangan Khusus – “IUPK”) is the valid document in this case. So it is entirely up to the host country whether it wishes to grant a license or not. I thus believe that now is the time for Indonesia to organize its national interests for the sake of its own prosperity. We are a state that follows the rule of law and must obey the law. This will be for the best,” Karnika stated.
Freeport began operating in Indonesia on 7 April 1967 after the signing of the first KK. The company’s KKs were then repeatedly extended until a fifth-generation KK was signed on 30 December 1991. This KK remains valid for a period of 30 years and thus expires in 2021. At present, Freeport’s production activities comprise of the Grasberg open-pit mine, the DOZ (Deep Ore Zone) underground mine, and Big Gossan in the Papuan District of Mimika.
Team Creation
The proposal to accelerate the Freeport share takeover will require some serious work from the government however and Mr. Damanik believes that a number of preparations will have to be made in order to start the process efficiently, including the creation of a dedicated team. This team should consist of lawyers and public accountants, as well as members of the government.
The team would require lawyers in order to monitor the legal due diligence process, while the public accountants would audit any financial statements.
“Preparation should get underway now, and a team of lawyers and public accountants should be picked. We will then be able to examine the share price and the company’s bookkeeping efforts. The technical and financial aspects of the takeover will also require a lot of attention. So we will need to get going well in advance of 2021. Leaving things until 2019 will be too late,” Mr. Damanik declared.
Daminak believes that a solid team will be able to smooth the share takeover process and asserted that the members of the team originating from the government should be drawn from the Legal Bureau of the Ministry of Energy and Mineral Resources.
“The team work has to be strong between the lawyer, accountant, and technical-assessment members of the team, and I think that a team consisting of members drawn solely from the Legal Bureau of the Ministry of Energy and Mineral Resources may not be enough to get the job done,” Mr. Daminak concluded.
(sp)