Grasberg Mine disputes & Valuation


Country’s point of view

Indonesia explains who got the better outcome in deals for future of the Grasberg copper mine.

Freeport agreed to divest a 51 percent stake the world’s second-biggest copper mine.

Firstly, right after the deals were concluded, Indonesia’s Energy and Finance Ministries posted on social media #FreeportTaatIndo

nesiaBerdaulat. Meaning “Freeport is submissive, Indonesia is a sovereign state”.

This grandiloquent statement explains Indonesian view of the subject. The country claims that dispute over Freeport was all about outflowing the country’s rights about mineral resources

Secondly, Indonesia feels it has a legit victory over this dispute pointing at nationalist sentiment. But having a further look at the matter, it is highly possible that additional “fights” with Freeport will take their place.

“The Phoenix, Arizona-based company explains it will divest 51 percent of PT Freeport Indonesia (PT-FI) and build a second smelter at Grasberg, in the eastern province of Papua.  And will also commit to invest up to $20 billion in the mine. “ (Reuters)


Freeport’s Angle

Following, Freeport can immediately apply for a decade of further operations. Beginning in 2021, potentially lasting till 2041. Paying tax & royalty rates during that term.

“While there are a lot of issues still to be worked on, politically this is a win for the government.” (Analyst at Jakarta-based Concord Consultin)

“It has taken on a big U.S. firm and appears to have won.” (Reuters)

Going through the Last year, Freeport offered a 10.64 percent stake in PT-FI. These values the mine at $16.2 billion while the government counter-offered at $630 million.

Freeport assumes that any Grasberg valuation should include the mineral resource. On the other hand Indonesia stays clear about the attitude that resource is essentially held by the country. Certainly not by the mine operator.

“There’s more reserves there than up to 2041 – these aren’t theirs.” (Indonesia’s Energy Minister.)

Freeport has to sell 41.64 percent of PT-FI to reach the divestment target. Adding to a 9.36 percent share the government already holds.



Indonesia hopes that the divestment would be made in one block rather than spread out and would be completed by the end of 2018.

While the company will be appointed to calculate the divestment valuation.

As Fajar Hari Sampurno said, the government is forming a consortium involving the central government and regional administrations to purchase the stake.

“The consortium will look for funding sources – it could be from equity, loans, obligations (or) pension funds.” (Reuters)

Under the law of Indonesia, the central government would have the first claim to the PT-FI stake. Followed by the country’s regional governments. State-owned enterprise or regional government enterprises would be next in line followed by private companies or a public offering for the stake.

Richard Adkerson (FP CEO)  said on Tuesday that “PT-FI shares are what we’re talking about with divestment.” And that after 2022 “PT-FI will retain its 60 percent interest in the joint venture.”

Shares of Freeport, the world’s biggest publicly listed copper miner, have dropped 6.3 percent in the two days since the announcement, closing at $14.56 on Wednesday. 

Further agitation will show the real outcomes. It is up to the Country’s decisions and aims to keep the mineral resources. It certainly is better if energy stays controlled by official organs.


New Mining deals: Indonesian government & PT Freeport Indonesia

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Indonesian Energy Minister announced on Tuesday that Indonesia highly expects to conclude the deals with Freeport McMoRan Inc. About operating in one of their biggest copper mines in Papua. The cooperation should take place in the upcoming decades.

The country’s mining and energy minister announced these ideas.

Speaking about the U.S. deals with Indonesia, the country’s mining giant was in a slight quarrel with Indonesia over the rights at Grasberg mine. This dispute is making huge costs for both sides, and these are estimated at hundreds of millions of dollars.

When reporters asked Minister Ignasius Jonan about the status of current deals & negotiations, he said:

“I expect to have a conclusion this month!” (Jonan says for Reuters) 


Mining Permits 

In July this year, Richard Adkerson (FPT CEO) said he for sure expects to conclude this special mining permit before October this year.

“Jonan said, when they finalize the agreement,  and allow Freeport all the needed permits.. They could apply for two 10-year permit extensions to mine at Grasberg beyond 2021.” (Reuters)

Regarding the new rules in Indonesia: Miners have to divest 51% stake, pay taxes and royalties. And in the end they have to relinquish arbitration rights. Freeport insists on all participants to follow these rules.

Reporters asked Mr Jonan did Freeport accepted these 51% divestment, and he said:

“Well if they don’t, they can go. We don’t negotiate that.” (Jonan for Reuters)


Real Inside Relations

With the beginning of current year Freeport said talks are in blind alley, and reminded they could do lots of damage for both sides. Then The government explained that they could solve this subject even in court if necessary.

“We will listen. We will accommodate as much as we can, but we cannot accommodate something that is clearly written in the law.” (Jonan for Reuters)

Clearly he wanted to emphasize their willingness to cooperate, but only in the possibilities of legal deals.

Riza Pratama (FT spokesman) said the negotiations with the government are ongoing. And they will soon be concluded clearly if both sides respect the main point.

“(The) four issues in the negotiations are one package deal. Divestment is one of the four issues.”

Real effects

Is he concerned that these happenings could result with some agitated movement inside Papua mine… Pratama says: “I don’t think so … it’s an internal labor issue inside Freeport’s operations.”


Imports from Argentina and Indonesia hurting U.S. biodiesel producers ?

A research


Firstly, some very interesting news are happening. Following, U.S. said it would start an investigation into its import of biodiesel. As mentioned, this biodiesel is coming from Argentina & Indonesia. It is possible that there are some signs of dumping and subsidization in the importing process.

In addition, the United States International Trade Comision is doing a research on this subject. It is scheduled to make a preliminary decision on May the 8th. The decision will be about whether such imports from Argentina and Indosnesia hurt U.S. economy and its diesel producers.

U.S. biodiesel producers asked their government last month to impose anti-dumping duties on imports of biodiesel. They said it has flooded the U.S. market. While it also violated the trade agreements. As that is happening, there are few more days left ahead Mike Pence’s visit to Indonesia. Mike Pence, U.S. Vice President is visiting Indonesia to check some real issues about anti-dumping prices of biodiesel.

Indonesian government stating the opposite


-“The Indonesian government, especially the trade ministry, will be cooperative in the investigation by providing arguments and supportive data. We can also give the documents which show that there was actually no dumping or subsidies.” (Indonesia’s director for international trade, Oke Nurwan.)

Following, the biodiesel group from Indonesia is saying that it had asked its government to bring up the issue. To bring it during Pence’s visit to Jakarta next week. Previously, Argentina’s biodiesel association called CARBIO rebuffed dumping accusations.

Indonesia is a world’s top producer of PALM OIL. As a very competitive resource it can be used to ruffle the biodiesel. Indonesia relies heavily on exports. Yet their economy highly depends on palm oil. Being able to export tons of palm oil to the world’s market, Indonesia puts itself to a very high place in trading with this resource.

Charts show amount of CPO to be used in biodiesel production in Indonesia. Those are the forecasts based on Indonesias Estate Corp Fund for Palm oil. Information From 2016, predictions are till the year 2020.


U.S. Imports



Charts: Showing 2016 & 2017 statistic data. U.S. production and import. (Millions of gallons, in January & February)

Total U.S. imports rose to 3.5 billion liters (916 million gallons). It was a record in 2016 according to the U.S. government data published in March. Argentina represents about two-thirds of United States foreign imports. It is followed by Indonesia and Canada.

In the meantime, Indonesia is facing a pressure in Europe too. It is happening because of its government filling a WTO complains against European Union’s anti-dumping duties on Indonesian biodiesel.

Finally, the European parliament voted last week to call on the EU to easily phase out the use of Palm Oil in biodiesel by 2020. Indonesia, along with Malaysia is planning to send a joint mission to Europe next month. They want to prevent the adoption of this resolution.