How is Freeport Morgan’s contract negotiation progress now?

How is Freeport Morgan’s contract negotiation progress now?

Freeport-McMoran Copper & Gold still have contract (Kontrak Karya – KK) in Indonesia untl 2021 since 7 April 1967 and last renewals in 30 December 1991. Freeport can propose new extension in 2019, 2 years before its end. But after government isseud UU No 4/2009 about Mineral and Coal Mining, also PP 9/2012 about PNBP and Keppres Number 3/2013 Freeport and others mining corporation should be fulfill the provision from the government.


So, why Freeport looks inconvenience with this regulations? Since 1967 Freeport was contribute around 20-30 percent copper mining for their company production around he world. It’s not a small contribution for the total production. In others, gold mining contribute more that 90 percent for total productions besides their mine in South America, North America and Africa. If they fail to extend the contract, their production will be affected and makes huge influence for their company.

At the new regulations Freeport and friends cannot exports in raw products like before. Government only allow to exports smelted concentrate. This time, Freeport only have 30 percent smelted product to sell, but the rest still in raw. In some news tells that Freeport agreed to built smelter unit in Gresik by with ANTAM start in second quartal, although reuters on 4 April 2013 said that the venture may not be ready before a ban on concentrate exports takes effect in 2017.

Until now the renegotiations still going, government propose Freeport six point to accept :

  1. reducing 40% of the working field for support activities to 127 thousand hectare.
  2. an increase in income tax from 10 percent than others, it will be 35 percent.
  3. an increase in royalties in accordance with Government Regulation No. 9 of 2012 from 3,5 to 4 percent for copper, 1 became 3,5 percent for gold.
  4. Freeport must cooperate with the Ministry of Industry to establish a task force to increase local mining local in Papua.
  5. the Government’s shares ownership must increased to 30% no later than 2021, lower than before government asked, 51 percent.
  6. Freeport must conduct domestic mineral processing and purification.

Last news tells that Freeport agree to accelerate to built smelter in Gresik, but the 30 percent divestment still unacceptable. Freeport only desire to release 20 percent. We still wait the final decission. But in other source, from President’s special staff of economic and development, Firmanzah, The decisionmay be held until the next pesident from the election on 9 July 2014.


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