Papua Govt. seeks Grasberg mine royalties hike for Freeport Indonesia stake

A Papua provincial government official says increasing Papua’s percentage of Grasberg royalties would help finance the government proposed 9.36% stake in PT Freeport Indonesia without partnerships.

The provincial government of Papua is asking to receive a larger share of royalties from Freeport-McMoRan Copper & Gold’s Grasberg mine to help it buy a 9.36% stake in PT Freeport Indonesia, the Jakarta Globe reported Tuesday.

Earlier this month Freeport spokesman Budiman Moerdijat said the sale of the stake in PT Freeport Indonesia is expected to be completed this year.

Investor Daily Indonesia has suggested in December 2009 that the Papua provincial government could join with Indonesia’s second largest nickel miner, PT Aneka Tambang (Antam), to buy the stake. The Papua government says it has not been approached by Antam or Indonesia’s Central Government about jointly buying the Freeport Indonesia stake.

The Globe reported Tuesday that Agus Sumule, an economic advisor to Papua’s governor, said Papua planned to fund the $1 billion purchase price through bank loans. A larger share of mining royalties would strengthen the government’s balance sheet and help to raise the money, he suggested.

Papua now receives 6% of the taxes and other financial obligations that Freeport Indonesia pays to the Indonesian Central Government. PT Freeport Indonesia paid an estimated $6.9 billion in the form of royalties, dividends and taxes to the central government between 2004-2009 of which 9.4% was paid to local governments, the company recently told the Indonesia Parliament.

Agus told the Globe that Papua’s government has proposed to the Finance Ministry and the House of Representatives that its share of Grasberg revenue should be increased to 30%.

Freeport owns 90.64% of PT Freeport Indonesia while the Indonesian Central Government owns the remaining 9.36%. Deputy State-Owned Enterprises Minister Sahala Lumban Gaol said earlier this month that the central government is considering increasing its stake and has submitted a proposal to Freeport Indonesia.

Sahala said the government had yet to decide how large a stake it wants to purchase. Meanwhile, PT Freeport is not legally obligated to sell part of its stake to local governments.**



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