US mining giant’s planned divestment in world’s largest gold and second largest copper mine threatens to become ensnared in election politics
If the difficult talks between the Indonesian government and American-owned Freeport McMoRan Copper & Gold over the future of Papua’s Grasberg mine drag on beyond mid-year, they might well be postponed until after next year’s legislative and presidential elections.
Analysts believe that as much as he wants to reach an overall settlement in the next two months, President Joko Widodo will not be keen for the negotiations on such key issues as valuation and managerial control to become a distraction ahead of or during the campaign period, which formally begins in mid-September.
Government sources say the president’s main concern is to secure funding commitments for the majority stake Freeport agreed to divest in its Indonesian subsidiary so he can show that progress is being made in implementing the framework agreement the two sides signed six months ago.
That means the pressure is on Budi Gunadi Sadikin, chief executive of state-owned holding company PT Inalum, to come up with the offshore bank loans needed to cover the cost of the acquisition, even if the valuation of the Grasberg has yet to be agreed. The Grasberg is the largest gold and second largest copper mine in the world.
It is widely believed Widodo will effectively turn over much of the running of the government to Vice President Jusuf Kalla in August or September, leaving some of the outstanding issues to be resolved after the simultaneous elections are held in April 2019.
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