PT Freeport Indonesia (PTFI), the subsidiary of the US mining giant Freeport McMoRan Copper & Gold (FCX), which operates large copper and gold mines in Papua, battles a string of ecological damage accusations, rogue armed gangs and a push for a takeover by a state-based aluminium smelter operator.

As reported in Indonesian media, the Supreme Audit Agency (BPK) has claimed that ecological damage resulting from PTFI’s mining operations in Papua had caused Rp 185 trillion (US$12.95 billion) in state losses.

“Based on the calculations of experts at IPB [the Bogor Institute of Agriculture], the environmental damage caused by Freeport’s mining waste reached Rp 185 trillion,” BPK commissioner Rizal Djalil said in Jakarta on Monday, as quoted by kompas.com.

He added that the mining company dumped its waste into forests, rivers and estuaries, using 4,536 hectares of protected forest for their operations in direct violation of Law No. 19/2004 on Forestry.

Rizal said the BPK had received data on the scale of the damage from the National Institute of Aeronautics and Space (Lapan), issuing the report to PTFI, which, according to Rizal “has not been followed up”.

In a response, Freeport Indonesia spokesman Riza Pratama said that the company did follow up on two BPK reports regarding violating the license on the use of protected forests and the environmental impact.

Government earns millions in revenue

In March this year, during a hearing with House of Representatives Commission VII overseeing energy, PTFI executive vice president Tony Wenas reported that total state revenue from PTFI amounted to US$17.3 billion in the 1992-2017 period, with US$756 million paid just in 2017. Almost 20% of last year’s earnings came from non-tax revenue (PNBP), and 17.85% from dividend.

In monetary terms, this translates to US$151 million in PNBP and US$135 million in dividend.

Additionally to this, PTFI had also paid US$82 million in export duty, US$108 million in corporate income tax and US$280 million in other types of revenue.

Continued negotiations

FCX and the Indonesian government have been locked in intense negotiations since 2017 regarding PTFI’s future operations in the country.

The government has expressed that it wants to increase its stake in PTFI from 9.36% to 51%, in return for an extension to PTFI’s operating permit.

President Joko “Jokowi” Widodo has called for the negotiations to be completed by April 2018.

Inalum push for take over

The state-owned aluminium smelter operator PT Indonesia Asahan Aluminium (Inalum) has been urged to immediately take over control of PTFI.

An economic observer from the state Gadjah Mada University, Fahmy Radhi, has been quoted in Tempo.co as saying that Inalum “should be seriously committed to wrapping up negotiations on Freeport divesting up to 51% of its shares”.

It is anticipated that the process of the takeover should come to a conclusion before end of Q3 2018.

According to Fahmy, the legal position of Inalum as the holding company for state mining companies has been strengthened after the Supreme Court had rejected a petition filed by the Coalition of Civilian Community for a judicial review of the regulation on a holding company in the mining sector.

The Supreme Court reasoned that the regulation was not contrary to the Law on state companies.

The state company holding system is based on the government regulation PP 47/2017 naming Inalum as the parent company for mining companies including PT Aneka Tambang Tbk, PT Bukit Asam Tbk, and PT Timah Tbk.

Armed groups a threat to operations

Armed groups, believed to be separatists hiding in the mountain jungle of Papua, continue to intermittently launch attacks on patrolling PTFI security officers.

Papua Police Chief Inspector General Boy Rafli, as quoated in Tempo.co, confirmed that “armed gangs of criminals” continue to create disruption to PTFI’s operations in the Tembagapura district.

According to Chief Inspector General Boy, the existence of the armed groups also poses a threat to local police and military personnel stationed in the area.

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