Danantara says Freeport stake will have a cost
Indonesia already holds a majority stake in Freeport, but officials signal Jakarta may seek more shares, possibly without payment.
[JAKARTA] Indonesia is close to reaching a deal with Freeport-McMoRan that would see it take an additional stake in the US giant’s Grasberg mine for an undisclosed price, according to the chief investment officer of the country’s Danantara sovereign wealth fund.
The government took a majority stake in Freeport Indonesia, which operates the site, back in 2018, but officials including Danantara’s chief executive, Rosan Roeslani, have since said Jakarta could take additional shares, potentially without payment.
An agreement to increase the 51 per cent stake in one of the world’s largest copper mines is close to concluding, but the shares would not be free, Danantara CIO Pandu Sjahrir said in an interview with Bloomberg TV on Wednesday (Oct 1). He declined to provide details.
“I wouldn’t say free of charge, there’s always a cost,” he said at the Milken Institute Asia Summit in Singapore. “There is a win-win for both sides.”
Roeslani said earlier this week that the US miner had agreed to grant a 12 per cent stake in its local unit to the government for free, in return for extending its operating licence past 2041. The company said in a later statement that the parties were working to strike a “beneficial” deal.
Negotiations for the original agreement to cede a majority stake to Jakarta lasted years and were often fraught, with the company and Indonesia clashing over everything from tax rates to how the miner dealt with waste from its operations.
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Production was halted for weeks in 2017 after the government banned concentrate exports, as part of former President Joko Widodo’s initiative to extract more value from the country’s natural resources. Meanwhile, the US miner threatened to take Indonesia to arbitration over laws it said had violated its contract.
Grasberg, in Central Papua, is one of the world’s largest copper operations, but is currently recovering from a mudflow incident that killed at least two and prompted Freeport to slash its guidance for copper production this year and next. The company issued a force majeure notice last week.
Sjajhrir also said Danantara would finalise its issuance of so-called Patriot Bonds in the coming weeks after registering with the Financial Services Authority on Wednesday. Indonesia’s wealthiest tycoons have already pledged to buy up the 50 trillion rupiah (S$3.9 billion) issuance, despite yields on the notes being lower than comparable government securities, Bloomberg reported.
“They see this as a significant way to contribute to the country,” Sjajhrir said. “They are very excited about this project because it can be run professionally at a very large scale.”
The bonds will be used to fund more than 30 waste-to-energy programmes in Indonesia, Sjajhrir said. Approximately 80 per cent of Danantara’s existing US$8 billion will be deployed domestically, while the remainder will be used overseas, he added.
The sovereign wealth fund is targeting a range of sectors including energy and data centres, as well as looking for means to achieve food security for Indonesia. It’s also looking to invest in fund management firms, with agreements set to be reached later this year and early 2026. BLOOMBERG
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