SCENARIO PLANNING

PT. Freeport Indonesia

HELLO! We Are Syndicate 3:Adib Akhmad 29115180Dian Sadar Adi Pratomo 29115417Gendis Mailundi 29115371M. Taufik 29115381Spencer Paoh 29115416

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STEP 1:KEY FOCAL ISSUE

Creating long term sustainability by continuing Contract of Work PTFI

PTFI contract Freeport Indonesia's contract to operate the Grasberg Mine (the world’s largest gold mine and third-largest copper mine) will expire in 2021 and although an agreement made in the 1990s allows Freeport to extend the contract by another 20 years, the mining company would like to have certainty from the current government as it needs to invest heavily in underground mining activities at the Grasberg Mine

STEP 2:DRIVING FORCESThe team was able to identify 18 possible driving forces that triggered PTFI initiative to get contract extension. PESTLE model was used to ease the brainstorming session using a structured model

POLITICS1. General Election2. Local government election3. OPM

ECONOMY10. Initial and On-Going Investment11. Commodity price12. Financial benefit

SOCIAL4. People Perception5. Changing the Social Status of Papuans6. Social clashes of local tribes

TECHNOLOGY13. Application of New Mining Technology14. Knowledge transfer15. Knowledge Management

LEGAL7. Government Regulation8. Legal Contract9. WKP

ENVIRONMENT16. Tailing17. Geysers18. Potential Natural Resources

UNCERTAINITY

IMPACT

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POLITICS1. General Election2. Local government election3. OPM

ECONOMY10. Initial and On-Going Investment11. Economic scale12. Financial benefit

SOCIAL4. People Perception5. Changing the Social Status of Papuans6. Social clashes of local tribes

TECHNOLOGY13. Application of New Mining Technology14. Knowledge transfer15. Knowledge Management

LEGAL7. Government Regulation8. Legal Contract9. WKP

ENVIRONMENT16. Tailing17. Geysers18. Potential Natural Resources

STAGE 2:SCENARIO CREATION – FRAMEWORK AND MATRIX

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loose

low

high

tight

Government Regulation

People Perception

STAGE 3:SCENARIO CREATION – NARRATIVE

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Legally, this situation is not beneficial for mining

companies as they will need a license to operate from the

government.

However, the societies support the mining companies

as it growing the economy operational activities in

existing location.

This would be the most perfect condition for Mining

companies. With good society perception and government support, Mining companies

can easily get the extension of the working contract to

operation smoothly and even can expand the business.

Mining companies getting a lot of rejection from society and not being supported by the government, hence they will

not be able to continue operating in Indonesia.

With this condition, Mining companies can still operate.

But they will get rejection from society that might harm the

company operations.

In long term, it might alter government policies because they are being pushed by the society. Politician could also

use this issue for their interest

Government Regulation

People Perception

STEP 4:SCENARIO CREATION – OPTIONS CONSIDERATION

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OPTIONApproach to legislative since they are represent the people to influence government.

Maintain and strengthen people perception through Good Corporate Governance

OPTION

Expand services to other area

Build additional Infrastructure to improve services

Increase price to improve profitability to cover short term and long term liabilities for future growth

OPTIONProvide new proposals for contract extension

Extraction of the application of technology and assets with the most minimum cost possible

Arbitrage Court / Legal action. This would be last option

OPTIONInformation engineering

Sharing information through 3rd party endorser

Invite public to see the actual condition “seeing is believing”

Implication

People perception of positive contribution might triggered pressure to give contract of extension

Implication

Contract Extension

Support from the government

Support from the community and the people

Implication

No Contract Extension

The loss of assets

Loss of expertise

License revoke

Implication

People pressure might trigger pressure to government not to give contract of extension

STEP 5 :SCENARIO CREATION – INTEGRATIONEarly warning signals

1. Reshuffle Cabinet – Change of Minister of Energy and Mineral ResourcesMight be changing the current policies and regulation

2. Indonesian government unveiled Law No. 4/2009 on Mineral and Coal Miningordered the mandatory renegotiation of existing contracts. the New Mining Law was a major setback as it banned exports of raw materials and development of Smelter facilities

3. NGO ProtestAction to retain environment sustainability

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5. NationalizationAssets being take over by Indonesian government

6. Political Conditions in IndonesiaThe possibility of Papua asking to be separate from Republic of Indonesia and corrupt government officials to gain personal benefit

THANK YOUAny Questions?

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