Freeport's quid pro quo lands kudos, criticism<\/p>\n
JAKARTA (JP): Analysts are split over the quid pro quo made by
\nmining company PT Freeport Indonesia to increase royalties to the
\ngovernment in return for the license to raise ore output at its
\ncopper and gold mine in Irian Jaya.<\/p>\n
Chairman of the Association of Indonesian Mining Professionals
\n(Perhapi) Herman Afif Kusumo praised it as \"a laudable feat of
\nthe government\", but consultancy group Econit dismissed the \"high
\nsounding but empty deal\".<\/p>\n
Herman told The Jakarta Post on Wednesday that Minister of
\nMines and Energy Kuntoro Mangkusubroto deserved praise for
\nsecuring higher royalties from Freeport, which he said were \"the
\nworld's highest\".<\/p>\n
However, he noted Kuntoro would still have to determine
\nFreeport's land conservation programs, including environmental
\nprotection, before giving the go-ahead for expansion to 300,000
\nmetric tons per day (tpd).<\/p>\n
\"Kuntoro has successfully negotiated for higher royalties but
\nhe has still to ascertain that Freeport will be committed to land
\nconservation programs before he issues the company permission for
\nits expansion.\"<\/p>\n
Freeport, a subsidiary of giant U.S. mining company Freeport
\nMcMoRan Copper & Gold, has agreed to double the royalties from
\nits copper mine and triple royalties from its gold and silver
\nmine if ore production at the Grasberg site exceeds 200,000 tpd.<\/p>\n
The new royalty scheme will be backdated to Jan. 1, 1999,
\nKuntoro said.<\/p>\n
Under the contract of work signed in late 1991, Freeport has
\nto deliver to the government between 1.5 percent and 3.5 percent
\nof its copper sales and 1 percent of its gold and silver sales in
\nroyalties.<\/p>\n
Econit, chaired by economist Rizal Ramli, said in a statement
\nsent to the Post on Tuesday that the government would not enjoy
\nthe increased royalties, even with the retroactive agreement, if
\nore output remained below 200,000 tpd.<\/p>\n
Econit cited Freeport's 1997 annual report as saying that the
\ncompany's ore output was 128,600 tpd for 1997, and added that it
\nbelieved output was still below 200,000 tpd.<\/p>\n
\"As such, the deal is only a high sounding but empty deal. It
\nlooks to bring advantage to the government, but in fact it only
\ngives promises.\"<\/p>\n
Econit said the new royalty scheme should be applied to all
\nlevels of production.<\/p>\n
No Freeport official was available on Wednesday to reveal the
\ncompany's current ore production.<\/p>\n
Freeport executive vice president Stephen M. Jones said in a
\nnews conference in July 1998 that the company's ore output
\nreached about 200,000 tpd, with it expected to increase to
\n240,000 tpd by the end of 1998. The company completed the
\nconstruction of its fourth concentrator for that purpose.<\/p>\n
Econit regretted the government's failure to pressure Freeport
\nfor a higher share of Grasberg, especially because of its
\nstronger bargaining position as the company desperately needed
\nthe license.<\/p>\n
It said the international community would understand the move
\nbecause Freeport was set to reap huge gains from the expansion
\nwhile Indonesia needed considerable revenue to deal with the
\nmonetary crisis.<\/p>\n
Freeport Indonesia is 81.28 percent owned by New Orleans-based
\nFreeport McMoRan, 9.36 percent by the Indonesian government and
\n9.36 percent by PT Indocopper Investama Industries.<\/p>\n
Indocopper is 49 percent owned by Freeport McMoRan, 50.48
\npercent owned by PT Nusamba Mineral Industries, a subsidiary of
\nthe Nusamba group, and the remaining 0.52 percent by the public.<\/p>\n
Kuntoro has repeatedly promised to honor contracts to provide
\ninvestment security in Indonesia.<\/p>\n
Herman said the government's economic benefits from raised
\nroyalties would be \"satisfactory enough\".<\/p>\n
\"But, Freeport would do better to divest some of its shares to
\nthe Irian Jaya administration to create a sense of belonging
\namong the Irianese to the company,\" he added. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/freeports-quid-pro-quo-lands-kudos-criticism-1447893297",
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