The Ministry of Energy and Mineral Resources (ESDM) has asserted that the government will take firm action regarding the late implementation of mandatory divestment by mining companies, and this includes PT Freeport Indonesia (PT Freeport). However, the government has also stressed that careful steps need to be taken before any sanctions are imposed after a company has failed to meet its obligations.

PT Freeport is obliged to divest its stocks to the government as stipulated under Government Regulation No. 77 of 2014 on Mineral and Coal Mining Activities (PP 77/2014). According to this regulation, the divestment-obligation process that relates to PT Freeport should have been completed by October 2015. However, the government, via the Ministry of ESDM, has now decided to extend this deadline until January 2016.

In anticipation that this deadline may also not be met by PT Freeport, the Ministry of ESDM has stated that it is ready to administer sanctions on the company. However, Bambang Gatot Aryono, Directorate General of Minerals and Coal at the Ministry of ESDM, has asserted that the government will adopt a cautious approach when administering sanctions on PT Freeport.

Mr. Aryono revealed that would be impossible to suddenly impose the most severe sanctions on the company. Instead, the Ministry of ESDM plans to reprimand the company gradually. Mr. Aryono clarified that Ministry of ESDM cannot nullify PT Freeport’s Contract of Work immediately and must first issue up to three written warnings.

“It is impossible to go straight to a contract default, as there are processes, either in the form of warnings or other kind of admonitions, that have to be adhered to,” explained Mr. Aryono during the Indonesia Mining Conference, which was held in Jakarta on Wednesday, 16 December 2015.

According to the amendment of PT Freeport’s Contract of Work, the company has until 2019 to divest 30% of its stocks to the government. At present, the government already owns 9.36% of PT Freeport’s stocks, while Freeport is planning to offer another 10.64% of its stocks to the government in the near future.

Mr. Aryono asserted that PT Freeport should propose a price for this 10.64% portion of its stocks to the government as soon as possible. Aryono also stated at the conference that he believed that PT Freeport would offer a proposal to the government in January of 2016 at the latest, and that the company was currently estimating the price of the stocks in question.

“Freeport will propose a price soon enough. They have until January,” explained Mr. Aryono.

After a price has been determined, PT Freeport will immediately make a proposal to the government. The government will then respond to the proposal by establishing a team to evaluate it. The results of this evaluation will then become the basis for negotiations between the government and PT Freeport and these talks will seek to determine a reasonable price for the stocks.

After a consensus has been reached between the Ministry of ESDM and PT Freeport regarding the stock price, the Ministry of Finance will take control of the rest of the divestment process. The Ministry of Finance will then decide which eligible state-owned enterprise will ultimately take control of the 10.64% portion of Freeport’s stocks. At present, Mr. Aryono declared, two potential state-owned enterprises are in the running for control of the stocks, PT Antam and PT Inalum.

Source (Hyperlink :http://en.hukumonline.com/pages/lt5672990d40215/govt-no-harsh-sanctions-for-pt-freeport-over-divestment-obligation )

Author : MarcellSihombing&Kartini L. Makmur

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