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Post Acquisition of Freeport: Indonesia is Predicted to Break Even by 2025

After the acquisition of 51% of PT Freeport Indonesia's shares in 2018, Indonesia is estimated to receive full return on capital by 2025 through dividends payment. 

Director of Mining Industry Indonesia (MIND ID), Orias Petrus Moedak stated that Freeport is predicted to pay US $ 1 billion dividend to Indonesian government, starting from 2022.

It means that by 2025, Freeport will have paid US $ 4 billion dividends to the state. This amount will be able cover the 51 percent divestment of Freeport Indonesia's shares to Indonesian state-owned enterprise, PT INALUM, which was valued at US $ 3.85 billion.

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"This is something promising but it is in the long run," he said at Commission VII of the Indonesian Parliament as reported by CNN Indonesia on Wednesday (1/22/2020).

However, he said that Freeport Indonesia will not pay dividends in 2019 and 2020. While in 2021, thedividend payments will not reached US $ 1 billion. This is because the income will decline considering due to transition from open pit to underground mine.

PT Freeport Indonesia (PTFI) was a subsidiary of Freeport-McMoRan Copper & Gold Inc. which manages one of the largest gold mine in the world in Tembagapura, Mimika Regency, Papua Province.

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Previously the state only had 9.36 percent of Freeport Indonesia's shares, while the remaining 90.64 percent was still controlled by Freeport-McMoran. Indonesia officially owns 51.23 percent of Freeport Indonesia's shares in 2018.

According to CNN Indonesia (1/22/2020), of 51.23 percent of Freeport Indonesia's shares, PT INALUM controls 26.23 percent directly. Meanwhile, the remaining 25 percent of the shares is owned by PT Indonesia Papua Metal and Mineral (IPMM) which is a joint venture of Inalum and a regionally owned enterprise (BUMD) owned by Mimika Regency Government and the Papua Provincial Government.

IPMM share ownership consists of 60 percent owned by Inalum and 40 percent of Papua's regionally owned enterprise. PT Freeport Indonesia received legal guarantee to operate until 2041.

According to CNBC Indonesia report on Wednesday (1/22/2020), in order to finance the acquisition, INALUM issued a global bond worth US $ 4 billion on the Singapore stock exchange. This was the largest bond ever issued by Indonesia.

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