There is still no agreement between Indonesia and Freeport Indonesia regarding the sale of a 10.64 percent stake in Freeport Indonesia. Indonesia's Ministry of Energy and Mineral Resources objected to the USD $1.7 billion asking price for the stake in Freeport Indonesia, the local unit of US mining giant Freeport McMoRan. Based on Indonesian Government Regulation No. 77/2014 on the Implementation of Mineral and Coal Mining Business Activities, Freeport Indonesia is required to divest a 30 percent stake (to an Indonesian party) before 2019.
13 February 2020 (closed)
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Today's Headlines Divestment Obligation
Indonesian oil & gas exploration and production firm Medco Energi Internasional is reportedly eager to acquire a majority stake in copper and gold miner Newmont Nusa Tenggara (NNT), subsidiary of the US-based mining giant Newmont Mining Corp, which operates the Batu Hijau copper and gold mine on Sumbawa (West Nusa Tenggara). On Wednesday (25/11), the Medco Group informed Indonesian Coordinating Minister for Maritime Affairs Rizal Ramli that a MoU has already been signed between Medco and NNT to purchase a 76 percent stake, valued at USD $2.2 billion.
Commission XI of Indonesia’s House of Representatives (DPR), which oversees the country’s banking sector, will soon propose a new draft of a bill that sets to limit foreign ownership in Indonesian banks at 40 percent (from 99 percent currently). Established banks that are majority-owned by foreigners will be given a 10-year period to divest their shares after the bill has been passed into law (reportedly an earlier draft only provided a five-year transition period for this mandatory divestment).
Latest Columns Divestment Obligation
Recently the Indonesian Government issued Government Regulation number 1 of 2017 (Regulation 2017). The Regulation 2017 is the fourth amendment of Government Regulation 23 of 2010 on the implementation of Mineral and Coal Mining Activities. In this column we discuss the main changes in the Regulation 2017 which relate to the extension of the business license of mining companies, the sales of minerals and coal, the divestment obligation and the refinery obligation.
Chances are big that Freeport Indonesia will conduct an initial public offering (IPO) on the Indonesia Stock Exchange to comply with the divestment requirement. Freeport Indonesia, the local unit of US-based Freeport-McMoRan Copper & Gold, operates the vast Grasberg mine in Papua. This mine is the world's largest gold mine and third-largest copper mine. The Indonesian government's divestment requirement is one the demands for starting contract extension negotiations in 2019.
The bargaining over the 10.64 percent stake in Freeport Indonesia has begun. Whereas Freeport proposed a price of USD $1.7 billion, Indonesia's Ministry of Energy and Mineral Resources says the stake is only worth USD $630 million. Due to Government Regulation No. 77/2014 on the Implementation of Mineral and Coal Mining Business Activities, Freeport Indonesia - the local unit of US mining giant Freeport McMoRan - has to divest a 30 percent stake (to an Indonesian party) gradually up to the year 2019. Currently, the central government already owns a 9.36 percent stake in Freeport Indonesia.
Under the old BKPM (investment body) Regulation number 5 of 2013 on Guidelines and Procedures on Licensing and Non-licensing of Capital Investment as amended by BPKM regulation number 12 of 2013 (Old BKPM Regulation), the divestment of Foreign Investment Companies (PT PMA) was no longer regulated. Under the investment regulation prior to the Old BKPM regulation there was such requirement. The new BKPM Regulation number 14 of 2015 regarding the Guidelines and Procedures for the Investment Principle Permit (New BKPM Regulation), once again includes a requirement to divest for PT PMA companies.
The obligation for foreign companies to perform a divestment of part their shares to Indonesian companies has raised already much discussion among foreign investors. Before the enactment of BKPM regulation number 5/2013 on Guidelines and Procedures on Licensing and Non-licensing of Capital Investment as amended by BPKM regulation number 12/2013 (BKPM Regulation), divestment was required for all foreign companies (PMA) in Indonesia. The new regime of the BKPM Regulation removes this obligation, even though there are still sectors in Indonesia which require foreign companies to divest, such as the mining sector.
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