Monday, February 20, 2017

1) Indonesia ready for Freeport tribunal

2) Freeport Explains Refusal on Mining Permit
3) Freeport gives government four months to negotiate 
new settlement
4) Compromise Amid Potential Massive Layoffs
1) Indonesia ready for Freeport tribunal
Linda Yulisman
The Jakarta Post Jakarta | Mon, February 20, 2017 | 06:24 am

In its latest move to settle a dispute over mining policy, the government has challenged United States mining giant Freeport McMoran to go to an international arbitration tribunal for a fair result.
Recently, the Energy and Mineral Resources Ministry granted approval to PT Freeport Indonesia, the local subsidiary of the politically connected gold and copper miner, to convert its contract of work (CoW) into a special mining license (IUPK). In so doing, the government will require the company to divest 51 percent of its shares and build a smelter within five years. As compensation, the government will allow Freeport to continue exporting copper concentrate.
Energy and Mineral Resources Minister Ignasius Jonan asserted that resorting to arbitration was a legal right. However, he said the government did not expect to face Freeport at an international tribunal because such a move would negatively impact their partnership.
“Nevertheless, it is a better measure than exploiting employee layoffs as a means to push the government,” Jonan said in a statement on Saturday.
Jonan also called on Freeport, the country’s largest taxpayer and oldest foreign investor, not to be “allergic” to the idea of divesting 51 percent of its CoW and the newly issued Government Regulation No. 1/2017. So far, the company has divested 9.36 percent of its shares.
The government on Friday issued a recommendation for Freeport, allowing the shipment of 1.1 million tons of copper concentrate until Feb. 16, 2018. Freeport operates Grasberg mine, the world’s second-largest copper mine, in Timika, Papua.
The recommendation was given after a five-week halt on exports. The halt in operations caused a reduction in working times, affecting some 33,000 workers. The government and Freeport have divergent views on divestment and investment guarantees and this is causing friction between the two.
Freeport has consistently stated it will only agree to the contract conversion if it secures a guarantee from the government on the firm’s long-term investment stability, including fiscal and legal certainty, as already stipulated in the CoW signed in 1991.
“PT Freeport Indonesia will keep protecting its rights under the contract of work while cooperating with the government to achieve a substitute agreement that can satisfy both parties,” Freeport spokesperson Riza Pratama said via a text message to The Jakarta Post on Sunday. Riza, however, declined to comment on any possible future moves to take the case to arbitration.
Apart from the divestment issue, the possibility of Freeport taking the case to arbitration has been stirred by a ruling from a tax court stipulating that the firm pay US$469 million in water taxes and penalties to the Papua provincial administration for the use of water between 2011 and 2015.
An internal shake-up that caused Chappy Hakim to resign from the post of president director on Saturday has also raised speculation over an arbitrationmediated dispute settlement.
Chappy, a retired air chief marshal who took the top position only three months ago, allegedly opposed the option of going to arbitration.
Kurtubi, a legislator from House of Representatives Commission VII overseeing energy and mining, said it would be better for Freeport to avoid a direct confrontation with the government through an arbitration process as the company had largely benefitted from the CoW system over the past 40 years.
“It [the government] has a big chance [of winning the dispute] because the [2009] Mining Law still acknowledges the CoW until it expires,” Kurtubi told the over the phone. “Freeport’s CoW will terminate in 2021 and after that there will be no CoWs in Indonesia, whoever the president will be. So Freeport’s demand to continue its current CoW is not realistic.”
Hikmahanto Juwono, an expert in international law at the University of Indonesia, emphasized the government’s favorable position should it meet with Freeport at a tribunal.
“If this case is taken to arbitration, the government is in a strong position because it never discriminated against Freeport. It has provided the company with alternatives, including allowing an extension of the contract of work,” Hikmahanto said. The expert suggested that the government pay attention to the desire of the Indonesian people to gain a greater degree of control over Freeport.
Despite the sizeable costs of going to arbitration, the current government should proceed because breaching the law could end in impeachment, he added.
According to a government source, the damage claim proposed by Freeport could amount to at least $8.3 billion.
MONDAY, 20 FEBRUARY, 2017 | 21:20 WIB
2) Freeport Explains Refusal on Mining Permit
TEMPO.COJakarta - PT Freeport Indonesia is consistently reluctant in changing their operations from the previous Contract of Work (CoW) into a special mining business permit (IUPK).
"For a number of reasons, we cannot accept the condition," said President and CEO of Freeport-McMoran Inc. Richard C. Adkerson on Monday, February 20, 2017.
According to Adkerson, the Indonesian government has already provided an export permit which requires PT Freeport to switch operations into an IUPK. The changes to an IUPK, Adkerson said, does not provide a sense of guarantee for the company's business operation. This is the reason why he demanded a legal and fiscal guarantee for Freeport.
Adkerson referred to Law No. 4 of 2009, regarding Mineral and Coal Mining that states that the CoW can continue to be valid. Although Freeport did not object with the IUPK, the company would like to continue operating under the original CoW in parallel with the IUPK.
PT Freeport has sent a letter to the Minister of Energy and Mineral Resources on Friday, February 17, 2017. The letter explains the differences in opinions between the company and the Indonesian government.
3) Freeport gives government four months to negotiate new settlement
Jakarta | Mon, February 20, 2017 | 03:13 pm
Richard C. Adkerson, the president and CEO of Freeport-McMoRan, has said his company will give the Indonesian government four months to negotiate a new settlement with the company in relation to a dispute over Freeport’s contract to operate the Grasberg mine in Papua.
If the negotiations fail, the company will go to an international arbitration tribunal to seek a resolution to the dispute, he added.
Adkerson said Freeport had told the Energy and Mineral Resources Ministry on Jan. 17 that the government had violated its contract of work (CoW) when it effectively terminated the contract, initially signed in 1991, and demanded that Freeport convert to a special mining license (IUPK).
“There are 120 days for the government and Freeport to resolve these differences and if they cannot be resolved, we will go through an arbitration process,” said Adkerson as reported by tribunnews.comon Monday.
The dispute started when the government issued a regulation stipulating that mining companies that wanted to continue exporting cooper concentrates must alter their agreements from CoWs into IUPKs.
Adkerson, however, claims that the 2009 Mineral and Coal Mining Law clearly states that Freeport’s CoW is still valid. As a consequence of this, Adkerson argues that the government does not have the right to demand that Freeport alter its contract.
“We cannot just give up our rights that have been given to us in the CoW,” Adkerson said in a press statement received by The Jakarta Post on Monday. (bbn)
4) Compromise Amid Potential Massive Layoffs
Jakarta. US mining giant Freeport-McMoRan hopes to reach a compromise with the Indonesian government in renegotiations of its mining contract to stave off potential massive layoffs, a top executive said on Monday (20/02).
Freeport Indonesia, the mining giant's local unit, laid off about 10 percent of its expatriate workers on Friday and will continue to let go of its contract workers this week, Freeport-McMoRan president and chief executive Richard Adkerson said in a press conference in Jakarta.
"I sincerely hope we can find a compromise," he said.
Freeport Indonesia's fact sheet shows that the company employs 32,416 workers, with 12,085 of them full-time and the rest as contractors. Of its employees, 152 are expatriates, 4,321 Papuans and 7,612 non-Papuans.
The dispute follows the government's ban on copper concentrate exports, which came into effect on Jan. 12. The ban is aimed at boosting the country's smelting industry, but Freeport argues that it would reduce output from its Grasberg mine by around 70 million pounds of copper per month.
Freeport and the government have been negotiating the terms of the company's special mining permit to replace the previous contract, following the implementation of the new mining regulation.
"The government says that we can export if we forfeit our contract. Freeport's position is that we cannot give up [the] contract. So, today, we're at [an] impasse," Adkerson said.
He said Freeport-McMoRan, which owns more than 90 percent of Freeport Indonesia, has not received dividends from its Indonesian unit for the past five years and will reduce its costs.
Freeport's annual capital expenditure amounts to about $1 billion, and operating expenses to around $2 billion, the chief executive said.
"We had to shut down significant parts of our operations because there's no place to store or ship the concentrate," he said.
The only option for Freeport Indonesia to comply with the regulation is to ship concentrate to its smelter in Gresik, East Java, which can only take about 40 percent of the company's normal output.
Adkerson said the company reserved the right to start arbitration against the government.
However, taking the dispute to arbitration could harm Freeport's relationship with the government, Energy and Mineral Resources Minister Ignasius Jonan said on Saturday, as quoted by Reuters.
But Jonan said "it would be a much better step rather than always using the issue of firing workers as a tool to pressure the government."

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