Antam gets priority to buy Freeport stake

Ika Krismantari, The Jakarta Post, Jakarta

The government will prioritize state mining firm PT Aneka Tambang (Antam)'s purchase of a 9.36 percent stake in mining firm Freeport Indonesia, a local unit of U.S. mining giant Freeport-McMoran.

Freeport, which mines copper and gold in Timika, Papua, is required to sell the stake under a mandatory divestment program as stated in the company's contract of work.

State Minister for State Enterprises Sofyan A Djalil said Thursday his office would send a letter to the Finance Ministry and the Energy and Mineral Resources Ministry requesting approval for Antam to get priority in buying the stake.

"State companies should get priority," said Sofyan.

Under its first contract of work in the 1970s, Freeport-McMoran was required to divest its stake in Freeport Indonesia to the government or to local firms, but no minimum percentage was set.

To comply with the contract, Freeport set 10 percent of its stake for the government.

However in the company's second contract of work, the government's shares were diluted to 9.36 percent because Freeport demanded compensation after the government refused to participate in financing the company's expansion.

Freeport then sold another 9.36 percent of its stake to local firm Indocopper, owned by Indonesian tycoon Bob Hasan. After the sale, Freeport controlled 81.28 percent of Freeport Indonesia.

However, in January 2003, Indocopper sold its shares back to Freeport, leaving Freeport-McMoran with 90.64 percent of the company while the government shares were unchanged at 9.36 percent.

The government eventually demanded Freeport divest the shares it purchased from Indocopper.

In 2004, a negotiation between Freeport and the government over the divestment plan were stalled when the Finance Ministry refused the US$619 million price tag offered by Freeport as it was considered too high.

Antam's proposal to buy the shares at that time was also rejected by the government.

However, after recent approval from Minister Sofyan, Antam has wider chance now to purchase the shares.

Antam president director Deddy Aditya Sumanegara said his company would select financing options for the purchase.

Deddy said the stake buyout would support Antam's efforts to diversify its mining products.

The publicly listed company has been intensifying efforts to acquire other mining firms, with the latest involving zinc producer Herald Resources of Australian.

Antam recently announced a joint venture with Chinese firm Zhong Jin to acquire Herald at cost of A$504 million.