Papua seeks stake in Freeport Indonesia

The government of Indonesia's Papua province has requested a greater share of the national government's royalties from PT Freeport Indonesia's gold and copper mine to help it buy a 9.36% stake in the company. Agus Sumule, an economic adviser to the Papua governor, told The Jakarta Globe that Papua planned to fund the purchase of the stake, worth an estimated $1 billion, through bank loans. A greater share of the royalties would strengthen Papua’s balance sheet and help it raise the money, he said.

Last year, Freeport Indonesia paid $1.4 billion to central government of which Papua received $84 million. Agus said Papua’s provincial government had proposed to the Finance Ministry and the House of Representatives that its share of the revenue be increased from 6% to 30%. Should the proposal be approved, Papua could start paying for the coveted stake in installments, he said.

The value of the stake has been estimated at $1 billion, but it fluctuates according to Freeport-McMoRan’s share price, Sumule said. “To acquire the stake we need a lot of money,” he said.

Sumule also disclosed that the Papuan government had not been approached by state-owned nickel miner PT Aneka Tambang (Antam), or the central government, about Papua and Antam jointly buying the Freeport stake. He said Papua was more interested in buying the stake itself.

The central government already owns a 9.36% stake in Freeport Indonesia. Deputy State-Owned Enterprises Minister Sahala Lumban Gaol said earlier this month that the central government was reviewing a plan to increase its stake and had submitted a proposal to Freeport Indonesia.