Surat Freeport untuk Sri Mulyani

1. Freeport-McMoRan Inc. Richard C. Adkerson
333 North Central Avenue President & Chief Executive
Phoenix, AZ 85004 Telephone: 602-366-7663
Facsimile: 602-366-7336
E-mail: richard_adkerson@fmi.com
September 28, 2017
Secretary General Hadiyanto
Ministry of Finance
Republic of Indonesia
Dear Mr. Secretary General:
We have received the Government’s position on divestment dated
September 28, 2017. We strongly disagree with the statements included in the
document and submit our response and clarifications of the inaccuracies contained in
the Government’s positions. Prior to announcing the Framework on the four points,
there was significant discussion on the four points between the ESDM Minister,
Minister of Finance and FCX’s CEO. Freeport has worked to be responsive to the
Government’s aspirations for 51 percent ownership but has been consistently clear
that the divestment is conditional upon the transactions reflecting fair value of the
business through 2041 and that Freeport retain management and governance control.
These are non-negotiable positions.
Government Position 1:
1. Shares divestment is until 51%, completed at the latest on 31 December 2018;
 Based on Article 24 number 2 of the Contract of Work (COW) the shares
divestment until the ownership of Indonesian participants reaches 51%
should have been completed in 2011, therefore the implementation of this
divestment is an implementation of postponed PTFI’s divestment obligation.
 The Government of Indonesia has the financial capacity to take over all
divested shares within the proposed divested period, which is at the latest is
until the end of 2018.
Freeport Response to Government Position 1:
1. FCX has agreed to discuss with the Government the timeframe for completing
the divestment. Freeport has proposed that the initial divestment take place as
soon as possible through an IPO listing and the full divestment take place in
stages over a period of years similar to the timeframe contemplated under
Government regulations.

2. September 28, 2017
Page 2
 There are no current divestment obligations under the PTFI COW. Article
24 indicates that: “If after the signing of this agreement then effective laws
and regulations or Government policies or actions impose less burdensome
divestiture requirements than set forth herein, such less burdensome
divestiture requirements shall be applicable to the parties to this
Agreement.”
 PTFI adopted less burdensome divestment requirements of
Government Regulation No. 20 of 1994, which revised the requirement
for Indonesian ownership to 5 percent (confirmed by BKPM letter
dated March 20, 1997). GR 20/1994 was later modified to allow for up
to 100% foreign ownership.
Government Position 2:
2. The valuation is conducted by calculating the benefit of mining business activity
until 2021 only.
 The valuation of the value is by calculating the benefit which will be
obtained until 2021 is in line with the expiration of the Contract of Work in
2021.
 After 2021 the benefit value until the extension to 2031 will be enjoyed
mutually by the shareholders.
Freeport Response to Government Position 2:
2. Freeport has steadfastly maintained that any divestment must reflect the fair
market value of the business through 2041, using international standards for
valuing mining businesses, all of which is consistent with its rights under the
COW.
 Freeport has contractual rights to operate until 2041. Article 31 of the COW
states: “this Agreement shall have an initial term of 30 years from the date
of the signing of this Agreement; provided that the Company shall be
entitled to apply for two successive ten year extensions of such term,
subject to Government approval. The Government will not unreasonably
withhold or delay such approval. Such application by the Company may be
made at any time…”
 Freeport has obtained legal opinions from highly regarded Indonesian
counsel supporting its rights to 2041. Furthermore, Freeport has invested
$14 billion to date and plans to invest an additional $7 billion in underground
development projects through 2021, which benefit the operations through
2041. The Government has approved its long-term plans through 2041
through the AMDAL and other document submissions.

3. September 28, 2017
Page 3
 Freeport’s international shareholders will not accept any transaction that
does not reflect the fair value of the business based on our contractual
rights through 2041.
Government Position 3:
3. Divestment is conducted by the issuance of new shares (right issue) by PTFI
which will entirely taken over by Indonesian participant.
 According to the Contract of Work Article 24 paragraph 2.e the divestment
may be conducted by the issuance of new shares.
 Divestment by the issuance of new shares is expected to increase PTFI’s
capacity to conduct capital expenditure investment in the future.
Freeport Response to Government Position 3:
3. Freeport will conduct divestment through the sale of shares owned by FCX and
its Joint Venture partner and will discuss PTFI’s capitalization to ensure that the
company can conduct capital investment in the future.
 The issuance of new shares will require a larger investment by the
Indonesian participant to reach 51 percent and will result in
overcapitalization of PTFI and an inefficient capital structure.
 Freeport will review with the Government plans to fund capital
expenditures.
Government Position 4:
4. After the divestment, the Government must obtain its rights in its entirety (51%
of the total production from all of the areas which included in the IUPK).
 FCX must conclude the Participation Agreement and other agreement
similar and/or in relation with the existing arrangement with Rio Tinto
before the divestment is conducted.
 Through such divestment, the Government must obtain 51% of the total
production from all of the areas which are included in the IUPK.
Freeport Response to Government Position 4:
4. The Government approved the Participation Agreement with Rio Tinto.
Freeport has advised Rio Tinto of its divestment requirements (based on the
proposed framework terms) such that the Government will obtain rights to 51
percent of the production areas. However, Freeport and its partners will
require that any divestment be conducted on the basis of fair market value of
the business through 2041.

4. September 28, 2017
Page 4
Government Position 5:
5. PTFI is requested to immediately respond to the due diligence request from the
Ministry of State Owned Enterprise (SOE) including providing convenience to
access data.
 The parties remain to support that the implementation of the due diligence
is able to immediately concluded for the smoothness of IUPK issuance.
Freeport Response to Government Position 5:
5. Freeport is preparing a data room to enable the Government to conduct due
diligence.
We view the September 28 proposal to be entirely inconsistent with our
discussions and understanding with the Government and this proposal does not
reflect the “Win/Win” spirit in which the Framework was reached.
FCX has recently provided the Minister of Finance with proposed structures
upon which it would be prepared to discuss divestment. Freeport is prepared to
discuss a path forward but cannot negotiate on the basis of the Government’s
September 28 proposal. Until such time as a definitive agreement is reached through
these negotiations, Freeport will continue to honor and abide by the COW and fully
reserves its rights thereunder.
Sincerely,
Richard C. Adkerson
RCA:jbg
cc: The Honorable Sri Mulyani Indrawati
Minister of Finance