Papua calls foul over Freeport fees

Papua calls foul over Freeport fees

Rendi A. Witular, The Jakarta Post, Jakarta

Dissatisfied with the disbursement of its share of the royalties
paid by mining firm PT Freeport Indonesia, the Papua
administration has accused the central government of "dishonesty"
regarding the amount of royalties it receives from Freeport.

"The government has refused to disclose the amount of
royalties paid to it by Freeport. The figure made public by the
Ministry of Finance is too small," Papua Governor Jaap Solossa
told the press at the State Palace on Tuesday.

He added that his administration had urged the finance
ministry on a number of occasions to disclose the true amount of
the royalties paid by the subsidiary of U.S. mining giant
Freeport-McMoran Copper & Gold Inc. in Papua, but to no avail.

According to the finance ministry, the royalties amount to Rp
150 billion (US$16.6 million) per year and are paid on a
quarterly basis. However, Solossa argued that the royalties
should reach at least Rp 500 billion based on his calculations,
but he did not give the details of how this figure was arrived
at.

Under the Fiscal Balance Law, Papua is eligible for 80 percent
of the total royalties paid by Freeport annually, while the
central government is entitled to the remaining 20 percent.

Solossa further complained that the government had yet to
transfer the royalties for the fourth quarter of 2004 to the
Papua administration without giving any acceptable reason for
this.

Regarding his administration's plan to acquire a 9.35
percent stake in Freeport, the governor said he was still
choosing between six investors keen to form a joint-venture
company to secure the stake.

"We are still at the negotiating stage with a number of local
investors, assisted by international fund managers, to jointly
acquire the stake," he said, adding that the stake would be worth
around US$700 million.

After forming the joint venture, the Papua administration
would hold discussions with the Ministry of Energy and Mineral
Resources with a view to securing the necessary approvals.

At present, Freeport-McMoran controls an 81.28 percent stake
in Freeport, with the remaining 9.36 percent being owned by the
central government and another 9.36 percent held by locally
registered investment firm PT Indocopper, which is controlled by
Freeport-McMoran.

Aside from the royalty issue, the Papua administration has
also requested the central government and Freeport to show more
commitment to the development of Papua, the country's eastern-
most province.

The Papuans have requested a fair split of the profits earned
by Freeport from mining gold and copper at its Grasberg mine,
located in the mountains near Timika regency. The mine is the
world's largest gold and the second largest copper producer.