2) Freeport Indonesia hopes to sell 10.64 percent stake through IPO: new CEO
1) Freeport Indonesia to Pursue IPO: President Director
By : Primus Dorimulu | on 9:45 AM November 24, 2016
Jakarta. Freeport Indonesia, the country largest gold miners, is likely to pursue an initial public offering in a move to comply with divestment rules after receiving support from the government on the plan, the president director said on Wednesday (23/11).
Under a 2014 government regulation, the local unit of US gold mining giant Freeport McMoran must divest 30 percent of its shares to any Indonesian parties by 2019. Today, Freeport McMoran controls 90.64 percent shares in Freeport Indonesia while the government owns the remaining shares.
An IPO has been Freeport Indonesia's preferable method to unload the shares, but the government has insisted the company must first offer the shares to government or state-owned enterprises.
Early this year, Freeport Indonesia offered 10.64 percent to government for $1.7 billion, but the deal failed to materialize with the government deeming the price too expensive.
Chappy Hakim, Freeport Indonesia new president director, said that Energy and Mineral Resources Minister Ignasius Jonan told him in a meeting last week that government had a change of heart.
"As of today, the government has the same stance as the company," Chappy said in a meeting with national media chief editors late on Wednesday.
"We now only need to calculate Freeport valuation. If its attractive, I think an IPO is very likely," he said.
Indonesian Air Force marshal Chappy was appointed as Freeport president director last week, arriving at a crucial time for the company as it tries to secure extensions for mining operations in the country beyond beyond the 2021, when its contract of works end.
The divestment is one of the government demands for starting contract extension negotiation in 2019.
But, it is also proof of one of the trickiest part of the bargain. Chappy predecessor, former deputy to the chief of the State Intelligence Agency Maroef Sjamsoeddin, resigned in January after he unveiled an extortion attempt by top politicians and lawmakers in regard to the company's planned share divestment.
The Indonesian subsidiary of Freeport McMoRan Inc (FCX.N) hopes to sell a 10.64 percent stake through an initial public offering, its new chief executive said on Wednesday.
The government requires Freeport Indonesia, the country's top copper miner, to divest the stake and "the two sides see that going to the stock exchange is the best option," incoming CEO Chappy Hakim told reporters in his first meeting with media since his appointment.
Under a 2014 memorandum of understanding (MOU) with the government, Freeport agreed to divest a 30 percent stake by 2019 and invest in domestic processing to win an extension of its contract beyond 2021.
The government already has a 9.36 percent stake in Freeport's Indonesian operations, and had hoped to take another 10.64 percent stake this year, but negotiations stalled after the government valued the stake at two-thirds below Freeport's offer price of $1.7 billion.
It would be difficult to reach a deal on a price for the stake if it is sold in a direct offer, Hakim said, speaking at a hotel in Jakarta late on Wednesday.
"We will never reach an agreement because interests from many sides are very influential in price-setting," he added.
"Freeport is more politics than business."
Freeport's Grasberg operation in Indonesia's far-eastern Papua region is one of the world's largest copper and gold mines and a key source of state revenue.
Freeport is negotiating with the government for an extension of its Grasberg contract, which is due to expire in 2021. The , looking to invest $18 billion to transition Grasberg from open pit to underground mining in 2017, wants to finalize an extension before it signs off on the expansion or build a second smelter.
Phoenix, Arizona-based Freeport's long-held aim to continue mining in Indonesia beyond 2021 has been beset by resignations and a political scandal.
Former parliament speaker Setya Novanto resigned in December after being accused of trying to extort shares from Freeport worth $1.8 billion. He denied the charges.
"An impact of listing a company is openness, fairness and transparency and this will really help," Hakim said.
An IPO would be conducted "as soon as possible," Hakim said, but noted that it related to the company's efforts to extend its contract of work and was still subject to discussions.
It is unclear if the Indonesian government will buy the stake when it goes on sale.
Energy and Mineral Resources Minister Ignasius Jonan could not immediately be reached for comment on the matter on Wednesday.
On Tuesday Jonan told reporters that an IPO may be allowed if regulations permitted the company to do so.
"We'll see," he said, noting that the government had not yet issued a regulation that would allow Freeport to extend its contract before 2019.
(Reporting by Fergus Jensen; Additional reporting by Bernadette Christina Munthe; writing by Fransiska Nangoy; editing by David Clarke/Ruth Pitchford)