Freeport Indonesia Promises to Build Copper Smelter in mid-2020 - Photo by PT Freeport Indonesia

JAKARTA (TheInsiderStories) PT Freeport Indonesia (PTFI) is aiming to start construction of a copper smelter in 2020, PTFI President Director Tony Wenas told reporters on Wednesday (06/12). The smelter is scheduled to start production in late 2023 with a total capacity of 2 million tonnes (MT) of copper concentrate.

Currently, PTFI is looking for a loan to finance a smelter project. The need for the project reached US$3 billion (Rp42.9 trillion) and is targeted to be completed by 2022. Now, 15 foreign and local banks have expressed interest in lending, Wenas Said.

He adds the smelter will be built in Gresik, East Java. The location is right in an industrial area – Java Integrated Industrial and Port Estate (JIIPE), owned by PT Pelabuhan Indonesia III and PT AKR Corporindo Tbk (IDX: AKRA).

In addition, he said, PTFI plans to request an additional export quota without disclosing the amount. The miner currently has permits to export 198,282 wet tons of copper concentrate.

The unit of America’ gold and copper producer, Freeport-McMoRan Gold & Copper Inc. (NYSE: FCX) and Indonesian mining holding PT Indonesia Aluminium Asahan (Inalum) agreed to build a copper smelter within five years of closing a deal last December with the Indonesian government to operate the giant Grasberg copper mine in Papua.

Last December, Ministry of Energy and Mineral Resources (MEMR) gave an extension for PTFI operating permit, through a Special Mining Business License to 2031. But there are several requirements to obtain the permit, like 51 percent shares divestment to Indonesian hands.

A state-owned enterprise Inalum will take over the shares once the transaction is complete. Based on the rules stipulated in Law Number 4 the Year 2009 concerning Minerals and Coal, the extension is carried out twice 10 years.

According to the minister, Ignatius Jonan, before the first 10-year extension ends in 2031, Freeport will re-apply for the second 10-year extension or until 2041. It will review various aspects such as the issue of paying taxes to fulfill the environmental aspects.

For the completion of PTFI shares sale, yesterday, Indonesia’s Supreme Audit AgencyCopper said the US’s miner Freeport McMoRan must pay Rp460 billion in royalties for thousands of hectares of the protected forest it used without a permit.

A 2017 state audit of operations at Grasberg copper mine in Papua recoded the miner use of more than 4,500 hectares of protected forest in which to deposit its tailings and had begun mining underground without a permit.

There had been no permission to use the forest area, and the damage that the disposal of tailings waste had on the ecosystem reached Rp185.58 billion. It’s estimated the company makes a damage worth of $13.3 billion resulting from tailings from the mine.

After lengthy discussions, Inalum agreed to buy 40 percent of the management rights, or a participating interest in the Grasberg mine in Papua from Australian miner Rio Tinto Group for $3.85 billion and the converted into around 40 percent of PTFI’ shares.

Coupled with the current government-owned shares and PT Indocopper Investastama’ shares which were also acquired, Inalum’ total shares in PTFI will reach 51.38 percent. For the acquisition planned, Inalum paid $3.85 per share.

US$1: Rp14,300

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