Indonesia’s government left no doubts as to who it believes got the better deal in its landmark agreement with Freeport McMoRan Inc on the future of the Grasberg copper mine.
After Freeport agreed to divest a 51 percent stake in Grasberg, the world’s second-biggest copper mine, Indonesia’s Energy and Finance Ministries posted on social media #FreeportTaatIndonesiaBerdaulat, or “Freeport is obedient, Indonesia is a sovereign state”.
The bombastic statement illustrates Indonesia’s view that the dispute with Freeport over the mine was all about asserting the country’s rights to its mineral resources. While Indonesia can point to a victory that appeals to nationalist sentiment, pinning down the details on the divestment indicates a further fight with Freeport.
Indonesia’s President Joko Widodo was the driving force behind the agreement demanding the divestment, a new smelter at the mine and that Freeport pay higher taxes, Energy and Mineral Resources Minister Ignasius Jonan told reporters on Tuesday.
The Phoenix, Arizona-based company said it will divest 51 percent of PT Freeport Indonesia (PT-FI) and build a second smelter at Grasberg, in the eastern province of Papua, and will also commit to invest up to $20 billion in the mine.
In return, Freeport can “immediately” apply for a 10-year extension of its operations from 2021, and potentially maintain operational control through 2041, paying fixed, albeit higher, tax and royalty rates during that term.
Shares of Freeport, the world’s biggest publicly listed copper miner, dropped more than 6 percent in early U.S. trading on Tuesday, recovering later in the session to close down around 2 percent at $15.21 apiece.
“While there are a lot of issues still to be worked out, politically this is a win for the government,” said Keith Loveard, a senior analyst at Jakarta-based Concord Consulting. “It has taken on a big U.S. firm and appears to have won.”
The biggest of the raft of issues to resolve is how the divested shares will be valued and who will buy them.
