Freeport refuses to increase royalty to 10 percent

President Director of PT Freeport Indonesia Rozik B Sutjipto said that renegotiation of the copper and gold giant?s contract with the government have almost been completed but the company had not agreed with the government?s proposal to increase the royalty to 10 percent as quoted by Bisnis Indonesia.

Rozik said the renegotiation should produce mutual benefits to both Freeport and the government.

?At least, there should be good understanding about mining operations,? he said, adding that many people saw Freeport as the only party which benefits from its mining operation without considering the large investment and time it had spent to carry out mining operations.

About the talks on royalties, it had almost reached an agreement, Rozik said. ?The royalty for copper is 4 percent of sales, gold 3.75 percent, copper 3.25 percent. There is no problem at that,? he said. ?But Pak Hatta (Coordinating Minister for the Economy) wants higher tariffs,? he added.

Hatta previously proposed Freeport to increase royalty to 10 percent.

Currently, Freeport pays royalty of 1 percent for gold and 1.5 percent of copper. The royalty payment is far lower than those required by the government, because Freeport bases the royalty payment on its contract of works.

According to the government regulation No. 13/2000 and Regulation No. 45/2004, mining companies should pay royalty of 3.75 percent of sales for gold, 3.25 percent for silver and 4.0 percent for copper.

Freeport secured a mining right to develop the Erstberg mine in Papua in 1967 and the Grasberg mine in Tembaga Pura, Mimika, Papua in 1988. In 1991, the government renewed the contract with Freeport, allowing the company to continue mining until 2041.(*)