The matter is the final point in a lengthy negotiation on the divestment process of PTFI, the local affiliate of United States mining giant Freeport-McMoran (FCX). The government has said that the divestment must be finalized no later than mid-July.

“The company needs more time to sort out issues related to the environment with the Environment and Forestry Ministry,” Bambang Gatot Ariyono, the Energy and Mineral Resources Ministry’s mineral and coal director, said on Wednesday.

The government has for the fourth time extended the mining company’s special permit for one month until July 31, on the grounds that it would provide ample time to fully finalize four key aspects in the divestment process, namely the contract extension, divestment, smelter construction and fiscal and legal certainty for Freeport’s planned long-term investment.

Bambang also emphasized that PTFI should also have finished its talks on the four aspects with state mining holding company PT Indonesia Asahan Aluminium (Inalum), which represents the government, by July 31.

“Currently, there is a team consisting of the Environment and Forestry Ministry, Freeport and Inalum to address the problem concerning the environment,” he said. “We expect the one-month period will also add pressure to both the government and PTFI.”

The Supreme Audit Agency (BPK) had discovered ecological damage resulting from PTFI’s mining operations in Papua.

According to its audit report, which looks into the implementation of PTFI’s contract of work (CoW) during the 2013-2015 fiscal years, the biggest loss incurred by the miner’s operations is in the form of environmental damages.

This includes the disposal of mining waste in bodies of water and forests, which the BPK estimates has led to Rp 185.01 trillion ($12.95 billion) in state losses.

The BPK also believes that PTFI has breached Indonesia’s forestry regulations by using 4,535 hectares of protected forest areas that have been subject to non-tax state revenue (PNBP) since 2008.

This means that PTFI’s use of the land may have resulted in state losses of up to Rp 270.83 billion in the form of PNBP during the 2008-2015 period.

BPK also discovered the disbursement of up to Rp 19.43 billion for reclamation activities at overlapping blocks.

It was known that last March, the results of the audit was being assessed by the Energy and Mineral Resources Ministry, which would then take the report to the Environment and Forestry Ministry to conclude the final step.

When asked about the latest assessment into the environmental impact of PTFI’s operations, the Environment and Forestry’s team leader, Ilyas Asaad, merely said “it is still under discussion”.

In April, the ministry issued a ministerial decree that gave PTFI six months to address the issue of mining waste, known as tailings, at its Grasberg mine, the world’s second-biggest copper mine.

Ministerial Decree No. 175/2018, which is a revision of a regulation, stipulates a new standard for mining waste management, which no longer allows a company to dump mining waste with total suspended solids (TSS) of up to 45 times the existing standard.

Bambang further said the energy ministry would monitor the environmental assessment from the Environment and Forestry Ministry, but underlined that the former would fully support any results from the latter.

“The Environment and Forestry Ministry has the authority [to settle the issue], but we will support its decision,” he said.

Indonesia is close to concluding the deal on PTFI’s future operations, which will make the government a major shareholder in the firm.

State-owned Enterprises (SOEs) Minister Rini Soemarno said the divestment agreement was expected to be finalized in two weeks. It has been nearly a year since FCX agreed to increase Indonesian’s ownership of the miner from 9.36 percent to 51 percent after a long tug-of-war negotiation.

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