TEMPO.CO, Jakarta - U.S.-based mining company Freeport-McMoRan Inc. has threatened to take Indonesia to international arbitration over mining permit dispute wherein its subsidiary PT Freeport Indonesia, the operator of Grasberg gold and copper mining complex in Papua, refuses to switch over its Contract of Work (CoW) to a special mining permit (IUPK).
Freeport-McMoRan president director Richard C. Adkerson said that negotiation with the Indonesian government is underway. Freeport has sent a letter to Energy and Mineral Resources Minister Ignasius Jonan on Friday last week explaining the dispute. Either party may take the dispute to international arbitration if no agreement was reached 120 days after the letter was sent.
Freeport-McMoran Inc. financial report as of December 2016 shows that the company has 26.9 billion pounds of copper and 25.8 million ounces of gold in reserve in Papua.
Freeport copper reserve in Indonesia is the third largest in the world after that of North and South America. Freeport’s gold reserve in Indonesia is its world’s biggest since it only has two mines i.e. in Indonesia and North America, which only has 0.3 million ounces of gold in reserve.
Grasberg is the world’s largest gold mine by production. Investingnews.com on December 1, 2016, ranked world’s 10 largest gold mines by production after analyzing the data from Thomas Reuters GFMS Gold Mine Economics. Below is the list the world’s largest mines.
1. Grasberg, Papua, Indonesia.
- Gold production: 1.23 million ounces.
2. Goldstrike, Nevada, United States.
- Gold production: 1.05 million ounces.
3. Cortez, Nevada, United States
- Gold production: 999,000 ounces.
4. Pueblo Viejo, Dominican Republic.
- Gold production: 953,000 ounces.
5. Yanacocha, Cajamarca, Peru.
- Gold production: 918,000 ounces.
6. Carlin, Nevada, United States.
- Gold production: 886,000 ounces.
7. Lihir, Papua New Guinea.
- Gold production: 805,000 ounces.
8. Boddington, Australia.
- Gold production: 794,000 ounces.
9. Olimpiada, Russia.
- Gold production: 760,100 ounces.
10. Kalgoorlie Super Pit, Australia.
- Gold production: 640,000 ounces.
ABDUL MALIK | VINDRY FLORENTIN
2) Wanted: a Win-Win Agreement with Freeport
TEMPO.CO, Jakarta - The government and Freeport Indonesia must reach an agreement soon on the alternation from a contract of work into a special mining business permit (IUPK). Negotiations do not have to be so protracted, let alone end up at the international arbitration court as Freeport has threatened.
The never-ending talks will cost both sides. There is still room for negotiation because Government Regulation No. 1/2017 covers this type of status change. The government and Freeport must be flexible, and not try for an all-out victory. They must both seek a cooperative formula that benefits both, but that is in line with the rules. This is needed not only to ensure that both benefit, but also to avoid legal problems at a later stage.
In accordance with the new regulation, a mining company holding a work contract must change it into an IUPK in order to export concentrate unrefined minerals. A company holding an IUPK is also obliged to divest 51 percent of its shares to Indonesia, in stages. Because it is only a permit, the government can revoke it at any time. This is different from a work contract, which cannot be cancelled until the end of the contract period.
Freeport has not directly agreed with this change of status. The US company has proposed a condition, namely that there is an investment stability agreement with the same standing for fiscal and legal certainty as a work contract. According to Freeport, this is very important for their long-term investment plan.
They also do not want to change the taxation principles in line with the regulation. In a work contract, the amount of tax and royalties is fixed until the end of the contract known as a nail-down, while under an IUPK, they would adhere to prevailing regulations. The government insists that Freeport comply with the regulation. Agreement could not be reached. As a result, since January 12, Freeport has not been able to export concentrate. Freeport subsequently laid off a number of employees and reduced their production of concentrate. But in the middle of the negotiations, last Friday the government reissued a permit to export concentrate for another year.
Renegotiation of an agreement is normal in business. It usually takes place if one or both parties discover something unfair in the existing agreement. And there are usually new offers to ensure the continuation of the cooperation. For example, in 1991 the New Order government asked for improvements to the first work contract that had been signed in 1967 despite the fact the 30-year agreement had not ended.
In order to reach a solution beneficial to both sides, Freeport should not use double standards in discharging its obligations. It should not choose a different regulation if it feels that one provision in the work contract is not to its advantage. Conversely, if there is a new rule seen as disadvantageous, Freeport should not return to the old work contract.
Whatever agreement is reached in the negotiations, the government's main consideration should be the principle contained in the Constitution, of bringing about the maximum benefit for the people. If the negotiations reach a dead end, neither the government including the local administration and the people of Papua nor Freeport will enjoy any rewards. Therefore, negotiations with the US mining giant must end with a mutually beneficial agreement. (*)
Read the full story in this week's edition of Tempo English Magazine
3) Amnesty International State of the World Report 2016/2017
COUNTRY REPORT INDONESIA 2016/2017
Broad and vaguely worded laws were used to arbitrarily restrict the rights to freedom of expression, of peaceful assembly and of association. Despite the authorities’ commitments to resolve past cases of human rights violations, millions of victims and their families were still denied truth, justice and reparation. There were reports of human rights violations by security forces, including unlawful killings and the use of excessive or unnecessary force. At least 38 prisoners of conscience remained in detention. Four people were executed.