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Indonesia's Return on Investment from Freeport Acquisition Can Be Faster

Thu 05 Jan 2023, 09:00 AM



Ri's cost to acquire 41.87% of Freeport McMoran (FCX) shares in PT Freeport Indonesia for US$ 3.85 billion in 2018 is expected to return capital in 2024, faster than initially estimated, namely in 2025.

PTFI President Director Tony Wenas revealed that the faster return on MIND ID's acquisition of Freeport shares was triggered by a surge in copper prices, higher than previously thought.

Tony said that initially the company estimated the price of copper at around US $ 3.75 per pound. However, it turns out that currently the price of copper has broken through to US $ 3.8 per pound, and later it is estimated that it will continue to rise to US $ 4 per pound.

That way, PTFI's revenue will soar and the dividends that can be given to MIND ID can be even greater. As is known, with this acquisition, Indonesia through MIND ID or Inalum has become the majority shareholder, namely 51.23% of PTFI shares from previously only 9.36%.

"By the time we are down 2025, it will still use the assumption of a copper price of US$ 3.75 per pound. Now the price is US$ 3.8, we assume it can still reach US$ 4," he explained to CNBC Indonesia, quoted on Wednesday (28/12/2022).

"Assuming US$ 4 (per pound), it can be achieved faster than previously calculated," he said.

He said that every difference of 10 cents on the dollar could have a big impact on the company's performance, as PTFI's copper concentrate production also increased to 1.6 billion pounds.

According to his calculations, every price difference of 10 cents dollars with such a large production, the potential increase in the company's revenue can reach US $ 160 million or equivalent to Rp 2.5 trillion.

"The price difference of 10 cents is a huge impact. We produce 1.6 billion pounds of copper, so if we produce 10 cents per pound, it is US$ 160 million," he said.

For your information, PTFI has so far deposited its dividend to MIND ID of US$ 900 million or equivalent to Rp 14 trillion.

"The government bought PTFI through MIND ID to issue bonds worth US$ 3.85 billion. So the cost for the acquisition of Freeport was US$ 3.85 billion. Until now, we have paid a dividend to MIND ID of US$ 900 million," he explained.

He said that in 2023 PTFI will provide dividends of up to US$ 1.6 billion or equivalent to IDR 25 trillion. With a note, this can be achieved if the price of copper is still around US $ 4 per pound.

Then in 2024, Tony said that he would return to pay dividends of up to US$ 1.6 billion. Thus, according to him, the acquisition cost can be said to be paid off or even exceed the initial value of US$ 3.85 billion.

"Next year, it will be around US$ 1.5 billion to US$ 1.6 billion if the price of copper is around US$ 4. And in 2024 it will also be around US$ 1.6 billion. So if totaled until 2024, it is already more than US$ 3.85 billion. So that can be said to be paid off," he concluded.

Previously, in 2020, the President Director of PT Inalum (Persero) or MIND ID, which at that time was held by Orias Petrus Moedak, explained that the takeover of Freeport shares was one of the many policies that had a long-term impact.

But in the short term, it has an impact on performance that decreases for 1-3 years. He explained that since 2021 there has been dividend receipts, but the value has not been US$ 1 billion. Starting in 2023, the dividend to be received is US$ 1 billion or IDR 14 trillion.

Three years later after the distribution of dividends of US$ 1 billion, according to him, the costs incurred for the takeover of PT Freeport will only be returned on investment.

"Since 2023 in 3 years after that we can payback. Actually, in 2021 there has been revenue, but not yet US$ 1 billion, we have obtained it in 2025," he said in a Hearing Meeting (RDP) at Commission VII of the House of Representatives, Wednesday (22/01/2020).

"Short term indeed we will experience like this. And we monitor closely from time to time, operationally it is going well," he added.

As is known, in 2018 Indonesia officially became the majority shareholder of PT Freeport Indonesia by 51.23% through the MIND ID Mining State-Owned Enterprise (BUMN) Holding or previously on behalf of PT Inalum (Persero).

The acquisition value to become the majority shareholder of Freeport reached US$ 3.85 billion or equivalent to Rp 55.8 trillion at that time. This acquisition marks an increase in Indonesia's ownership in PTFI from just 9.36% to 51.23%.

Image source: Biro Pers Sekretariat Presiden



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