Freeport Could Be Paying Rp 1,200 Trillion to the State Until 2041

01 September 2023

PT Freeport Indonesia (PTFI) has estimated, until its current IUPK special mining operation permit expires in 2041, this biggest mining company in Indonesia could well be paying Rp 1,200 trillion to the state. 

PTFI President Director Tony Wenas says this figure was reached based on calculation of contributions to the state from the time the company’s IUPK was extended in 2018 until 2041. “We have estimated that from (the year) 2018 until 2041, we could be making direct as well as indirect contributions to the state amounting to around US$ 80 billion or Rp 1,200 trillion. This would be one way of our contributing to Indonesia’s Advancement, to a Golden Indonesia in 2045," Tony said to CNBC Indonesia during a BUMN (SOE) Performance Report 2023 program, as cited on Friday (1/9/2023).

Tony further disclosed, from the time the Freeport Contract of Work was renewed in 1992 to extend until 2018, the company contributed direct benefits in excess of Rp 400 trillion. Meanwhile indirect benefits contributed to this same period amounted to Rp 900 trillion. “Initially under the Contract of Work, from ’92 through 2018 we paid more than Rp 400 trillion in direct benefits. And from ’92 to 2018, the amount in indirect benefits in the form of employee wages, domestic procurements, community development programs, and infrastructure development came to Rp 900 trillion,” Tony divulged.  

Tony also said the company’s contribution to the state in 2022 amounted to Rp 55 trillion. Of this sum, Rp 8.7 trillion went to the Papua provincial government and the government of Mimika Regency, where Freeport’s mining operation is located.  “As you can see, our contribution to the region out of the Rp 55 trillion for the state in 2022   came to Rp 8.7 trillion for the provincial and regency governments, from Freeport alone,” he stated.  

Earlier, the Indonesian government had signaled it would be extending the IUPK special mining operation permit for Freeport Indonesia until 2041. This was indicated by Investment Minister/ Head of Investment Coordination Agency BKPM Bahlil Lahadalia. Bahlil said the government was considering renewing Freeport Indonesia’s IUPK in light of the company’s positive performance. Indeed, he said the cost of Indonesia’s acquiring a 41.87% stake in the company from Freeport Mc-Moran through MIND ID in 2018 for a price of US$ 3.85 billion would be recovered in 2024. 

As reported, the acquisition was made by Indonesia to become majority shareholder of PT Freeport Indonesia with 51.24% shares. "And Freeport has even reported to Indonesia that by 2024 the debt incurred by BUMN to take over the Freeport shares could well be paid up in full, and therefore the government is thinking of increasing its shares ownership,” Bahlil had stated during a press conference on Realized Investments in Q1 of 2023 on 28 April 2023.  

He said the government would be increasing its stake by 10%. “The government would be increasing its stake by 10%, this is just a mention, an official announcement will be made later, as discussions are still underway,” he asserted. 

For the record, Freeport was formally issued an IUPK in 2018 along with completion of acquisition of 51% shares in Freeport by MIND ID. Subsequently, in 2018 the Indonesian government officially extended Freeport’s operating permit by 2 x 10 years or until 2041, counting from the time of Freeport’s Contract of Work expiring in 2021. Freeport Indonesia has been operating since 1967 and was granted its first contract extension in 1991, with another 30-year operating period until 2021.

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