Govt not to extend freeport contract before 2019: Minister

Based on regulations, PT Freeport can only request a contract extension two years before the ongoing contract expires.
Jakarta (ANTARA News) - The government will not extend the mining contract of PT Freeport Indonesia before 2019, Energy and Mineral Resources Minister Jero Wacik said.

"Based on regulations, PT Freeport can only request a contract extension two years before the ongoing contract expires," the minister told the House of Representatives (DPRs) Commission VII on energy affairs at a hearing here on Wednesday.

He explained that the current work contract of PT Freeport will expire in 2021, so the US-based mining firm can only submit a request for contract extension during or after 2019.

Moreover, President Susilo Bambang Yudhoyono has issued a circular asking his ministers to stop issuing any further strategic policies. The current government will end its term of office in October 2014.

The minister stated that it was a dilemma for the government to provide a contract extension for PT Freeport.

"It would be a mistake for the government to extend the contract, but if it does not, there is no guarantee of further investment from PT Freeport," the minister noted.

The government, he explained, is considering that fact. A working contract extension will not be granted at this time, but the government is considering how this will impact further investment.

Jero Wacik also pointed out that Freeport had committed to paying US$115 million in guarantees for the development of smelters.

The guarantee funds deposited in the governments escrow account are equal to five percent of the investment for building a smelter worth US$2.3 billion.

The company will be given a fiscal incentive that focuses on exports by providing an export duty reduction in view of its readiness to build a smelter.

"If the progress of its smelter development reaches 50 percent, the export duty will be cut by 50 percent, and if the smelter starts operating officially, the export tax will become zero," the minister said.

He also added that renegotiations of mining contracts will be finished in the current term of government, which expires in October.

"Almost all have agreed to the points included in the negotiation documents," Jero Wacik claimed.

In the meantime, US Ambassador to Indonesia Robert Blake has expressed hope that further negotiations between PT Freeport Indonesia and the Indonesian government will yield results that benefit both parties.

"The negotiations between Freeport and the Indonesian government will take place soon, and we hope an agreement can be reached that will benefit both parties," Blake stated while visiting the Dosay health center on Tuesday in reply to a question posed by an Antara contributor about the divestment of PT Freeport Indonesia shares.

Blake said he was proud of Freeports contribution to Indonesia.

"We are proud of Freeports contribution to the economy of the people in Papua, in particular, and Indonesia, in general," he remarked.

With an agreement between the two parties, Freeport will continue operating and providing jobs for the people in Papua and Indonesia, the ambassador added.(*)