REPUBLIKA.CO.ID, JAKARTA -- The government through the Energy and Mineral Resources (ESDM) Ministry has agreed to grant a provisional Special Mining Business Permit (IUPK) to Freeport Indonesia valid until October, 2017.

Secretary General of the ESDM Ministry Teguh Pamudji in an news conference here on Tuesday said the government and Freeport have held intensive negotiations since February after the U.S. based mining company rejected the change in its contract from contract of work (KK) to IUPK. 

Teguh said the government wants to cope with the deadlock over the status of Freeport in two phases -- short term and long terms.

Short term settlement is backgrounded by the need to give legal basis and business certainty for Freeport, he said. 

Also the short term settlement would give clearance for the government over contractual relations after the Government Regulation No. 1 of 2017 on the fourth revision of the Government Regulation No 23 of 2010 on Implementation of Business Activities of Mineral and Coal Mining Business. 

"In discussion on short term issue last week, we agreed with Freeport that IUPK would be granted provisionally for 8 months," Teguh said.

With the IUPK, Freeport is allowed to export concentrate in 8 months by paying export tax, he added. 

"While issuing the IUPK, we still honor the regulations in the KK contract," he said. 

Teguh, who is also the chairman of the Government Team of Negotiators, said starting next week there would be a second round of negotiation on long term settlement for 8 months from February 10 to October 10 this year. 

In the negotiation on long term settlement, a number of points to be discussed include regulation related to investment stability, continuation of the operation of Freeport, divestment and construction of smelter (mineral refining and processing facility).

Teguh said if after the negotiations on long term settlement ended without agreement between the government and Freeport, the subsidiary of the U.S. mining giant Freeport McMoRun Copper and Gold would return to its KK status until its termination in 2021. 

"If the negotiation still ended in deadlock, it (Freeport) could return to KK in status but may not export," he said. 

Director General of Mineral and Coal Bambang Gatot said the second round of negotiation would discuss in greater details investment stability that Freeport could get operational supporting facility. 

"Also to be discussed in the negotiation is operational extension. Based on the government regulation extension is 2x10 years -- from 2021 to 2031 in the first phase and 2031-2041 in the second phase," Bambang said. 

Other important issues to be discussed include divestment of shares to Indonesian partners up to 51 percent and certainly extension of contract. 

"As for the 51 percent divestment, it is to be realized in the next four years by 2021. That is the logic," he said. 

The regional administration both provincial and district/city administrations in Papua would be involved in the process of negotiations on long term issues, he added.

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