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Scheme To Prevent Selling Of Freeports Shares Ministry

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The government recently responded to papua Governor Lukas Enembes opposition to the assignment of PT Indocopper Investama (PTII) as the company that would accommodate 10 percent of gold and Copper miner PT Freeport Indonesias (PTFI) shares that had been allocated for Papua.

The State-Owned Enterprises Ministrys mining, strategic industries and media affairs undersecretary, Fajar Harry Sampurno, said on Monday that the decision to assign PTII to accommodate Papuas shares in PTFI was to prevent the possible sale of shares by certain parties.

Fajar referred to an example of a local administration in West Nusa Tenggara (NTB) that had lost 24 percent of its shares in PT Multi Daerah Bersaing (MDB), a joint venture company established to accommodate the shares during the divestment of gold and Copper mining company PT Newmont Nusa Tenggara.

MDB was a joint venture of Bakrie Group subsidiary Bumi Resources, the NTB administration and West Sumbawa and Sumbawa regencies.

A few years ago, MDB put 24 percent shares of Newmont into a mortgage so as to obtain a loan from the Singapore branch of Credit Suisse.

As a result, the regions were not able to obtain dividends from Newmonfs operation as the funds should be used for loan refinancing.

In January, the government agreed to give papua 10 percent of PTFIs shares, which will be divided into 3 and 7 percent owned by the papua provincial administration and Mimika regency, respectively.

PTII, a local subsidiary of American mining giant Freeport McMoRan (FCX), currently holds 9.36 percent of PTFIs shares.

State-owned mining holding company PT Indonesia Asahan Aluminium (Inalum) is set to acquire 100 percent of PTIIs shares for US$350 million.

Under the scheme, Inalum and the papua administration-owned company will own 60 percent and 40 percent of PTII, respectively. The 40 percent stake in PTII is equal to 10 percent of PTFIs shares.

After the divestment, Inalum, PTII and FCX will own 26.23, 25 and 48.76 percent, respectively, of PTFIs shares.

Therefore, after the deal is complete. Indonesias stakes in PTFI will be increased from 9.36 to 51.23 percent.

Responding to the situation with Papua, Inalum corporate communications head Rendi Witular said his firm deeply understood the aspirations conveyed by the papua governor.

"[...] and we will continue to work with the papua provincial administration and Mimika regency administration to find the best solution," he said in a press statement last week.

Furthermore, Rendi said the decision to use PTII was for the benefit of papua province as it would omit unnecessary legal and administrative hassles and reduce costs coming from new taxes.

"Holding 25 percent of PTII shares frees them from dividend taxes, which would be imposed on any entity that has fewer than 25 percent of shares," he said.

He said further that Inalum was waiting for the papua administration and Mimika regency administration to set up their local state-owned enterprise.

"We are hoping to have another meeting with the papua administration soon to discuss the issue." Rendi said.

Indonesia, through Inalum, is expected in December to become the majority owner of PTFI, the operator of the worlds second-biggest Copper mine, Grasberg, in Papua, by increasing its current shares from 9.36 to 51.23 percent. The deal would cost Inalum $3.85 billion.

Stefanno Reinard Sulaiman

 Source : TheJakartaPost, November 28, 2018