The Energy and Mineral Resources Ministry has revised one of its rules to qualify for temporary special mining permits (lUPK) for miners negotiating terms of conversion from a contract of work (CoW) with the government.
Ministerial Decree No. 28/2017, a substitute for Decree No. 5/2017 on adding value to minerals through domestic processing, was signed on March 31, just days before the ministry announced that it had awarded major gold and copper miner PT Freeport Indonesia an eight-month IUPK, thus enabling it to secure an export permit for its copper concentrates.
Prior to the publication of the amendment on Monday, many parties argued that Freeport Indonesia’s IUPK was groundless as previous regulations stipulated that miners could only obtain such a permit after they "finished negotiating 11 requirements.
Freeport Indonesia, a subsidiary of United States mining giant Freeport McMoRan Inc., on the other hand, has been given IUPK status and time to negotiate its conversion terms until October.
Under the revised decree, the minister can award miners an IUPK once they submit a proposal to convert from their CoW.
The short-term IUPK may either last until the CoW’s expiry or a "specific time period to accommodate adjustments to continued operations."
When asked about the revision. Energy and Mineral Resources Minister Ignasius Jonan was tight-lipped.
"I forget, ask me next time," he said on Monday.
The new decree also allows miners to return to their CoW after the time period set by the minister if the adjustments fail. Under the previous rule, a CoW was immediately deemed null after conversion.
Furthermore, the decree also stipulates that the terms and conditions written in a CoW will still apply even though the miners have gained short-term IUPK status.
While some may perceive the revision as a means of accommodating Freeport Indonesia, the firm, backed by its parent company, has consistently rejected the requirements to change its CoW to an IUPK, arguing that they violated the investment certainty provided by its CoW dating back to 1991.
After the government passed Government Regulation (PP) No. 1/2017, which demands miners convert their CoW into an IUPK, divest 51 percent of their shares to national entities and build smelters within five years, in exchange for export permits, tensions esca-latebetween Freeport Indonesia and the government, with the former threatening to take the latter to international arbitration.
Following a short pause, the firm earlier this month resumed production at 40 percent of its normal rate after securing an export permit for anode slime, a byproduct of copper processing.
Separately, Freeport Indonesia spokesman Riza Pratama said the firm had not yet obtained an export permit for copper concentrates, but was still in the process of doing so.
The decision to grant a temporary IUPK came just before US Vice President Mike Pences visit to Indonesia next week.
Freeport-McMoRan is known to be politically connected, as the majority of its shares are owned by US billionaire Carl Icahn, a special adviser on regulatory reform to US President Donald Trump.
Experts contacted by The Jakarta Post claim that the new revision \iolates the 2009 Mining Law and was only issued to ensure Freeport Indonesias cooperation.
Mining expert Bisman Bakhtiar cited several \iolations, including that the revision did not comply with the Mining Law in that a mining area should first be listed as a state reserve area (WPN) once its CoW expires.
Furthermore, it also does not make the decision to award an IUPK mining area to miners subject to approval by the House of Representatives.
Executive director of the Centre for Indonesian Resources Strategic Studies (Ciruss) Dis-an Budi Santoso, meanwhile, 4 said the revision revealed clearly that the government was bowing to pressure from Freeport Indonesia.
"If the government really wants to allow Freeport to export its concentrates only, it honestly doesnt need to keep manipulating regulations. All it needs to do is to appoint a third party that wants to build a copper-related smelter. With the cooperation [between Freeport and the third party], Freeport no longer needs to build one as it has fulfilled that requirement," he said.
JP/ Fedina S. Sundaryani
Source : The Jakarta Post, April 11, 2017