The Asia Miner

JUN 2018

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 15 • issue 2 15 REGIONAL FOCUS: Indonesia Making ventilation work for you Performance and reliability under all conditions Let Zitrón supply the ventilation system that works for you Contact Zitrón at: enquiries.asia@zitron.com.au 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, baƩles a string of ecological damage accusaƟons, 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 resulƟng from PTFI's mining operaƟons in Papua had caused Rp 185 trillion (US$12.95 billion) in state losses. "Based on the calculaƟons of experts at IPB [the Bogor InsƟtute 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 operaƟons in direct violaƟon of Law No. 19/2004 on Forestry. Rizal said the BPK had received data on the scale of the damage from the NaƟonal InsƟtute of AeronauƟcs 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 violaƟng 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 RepresentaƟves Commission VII overseeing energy, PTFI execuƟve 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. AddiƟonally 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 negoƟaƟons since 2017 regarding PTFI's future operaƟons 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 operaƟng permit. President Joko "Jokowi" Widodo has called for the negoƟaƟons 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 commiƩed to wrapping up negoƟaƟons on Freeport divesƟng up to 51% of its shares". It is anƟcipated that the process of the takeover should come to a conclusion before end of Q3 2018. According to Fahmy, the legal posiƟon of Inalum as the holding company for state mining companies has been strengthened aŌer the Supreme Court had rejected a peƟƟon filed by the CoaliƟon of Civilian Community for a judicial review of the regulaƟon on a holding company in the mining sector. The Supreme Court reasoned that the regulaƟon was not contrary to the Law on state companies. The state company holding system is based on the government regulaƟon 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 separaƟsts hiding in the mountain jungle of Papua, conƟnue to intermiƩently launch aƩacks on patrolling PTFI security officers. Papua Police Chief Inspector General Boy Rafli, as quoated in Tempo.co, confirmed that "armed gangs of criminals" conƟnue to create disrupƟon to PTFI's operaƟons 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 staƟoned in the area. PT Freeport Indonesia's woes deepen

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