Indonesia plans new mining contract renewal rules by year-end

[JAKARTA] Indonesia plans to amend its rules on mining contracts by the end of the year, a government official said, allowing US miner Freeport-McMoRan Inc to apply for an extension of its contract at the Grasberg copper and gold mine.

Freeport has for years been seeking contract certainty from the Indonesian government. Its existing mining contract ends in 2021, but present rules only allows talks on an extension to start two years before a contract is due to end. "A revision to the government regulation on the time of a contract extension proposal, is now being processed in the economics ministry," Bambang Gatot, director general of coal and mineral at the mines ministry told reporters on Friday. "We expect it can be released soon, this year," he said.

The new rules may allow companies to proprose an extension 10 years before their contracts expire.

Freeport said on Thursday it had been assured by the government of Indonesia that the contract for its Grasberg mine in the eastern province of Papua would be extended beyond 2021.

The government has been rolling out new measures to re-energise Southeast Asia's largest economy after growth cooled in the second quarter to 4.67 per cent, the slowest pace in six years.

President Joko Widodo has shown signs that the government is trying to mend fences with wary investors following a series of nationalistic policies by the previous administration.

Freeport plans to invest US$18 billion to transition the Grasberg complex from an open pit to underground mining in late 2017. The company currently produces about 220,000 tonnes of copper ore per day, which is then converted to copper concentrate.

The move on a contract extension comes after the US miner previously reached agreements on higher royalties, an export tax and domestic processing and divestment.

REUTERS