JAKARTA (TheInsiderStories) – PT Freeport Indonesia (PTFI) will close the operation of the open-pit gold mine in Grasberg, Papua–where the ore body occurs near the highland surface.
As a result, said Executive Vice President of PTFI Sony Prasetyo on April 16, the company’s production will drop significantly from 200,000 tons per day to by 80,000 tons per day in 2019. Followed the decision, he said, the unit of U.S miner Freeport Mcmoran Inc. (NYSE: FCX) revenues will shrunk.
The open-pit method is used in mining the Grasberg ore body and occurs near the highland surface. Almost the entire open-pit mining process consists of the stages of drilling, blasting, sorting, hauling, and crushing of ore. The overall open-pit mine process is scheduled in order to net present value of the mineral resource.
Vice chairman, President & CEO Richard C. Adkerson has said on Feb. 27, Freeport Mcmoran prepared up to US$20 billion to develop Grasberg gold and copper mine until 2031. For this year the miner prepared capital expenditure $2.1 billion.
Around $1.2 billion of the fund will distribute for major projects, primarily for Underground Development in Indonesia and Lone Star Oxide Project. While, $900 million for other mining.
Currently, Freeport has asked for a guarantee on rights to mine Grasberg up to 2041 before committing to billions of dollars of planned underground mine investments and a second Indonesian copper smelter.
The company also in discussion process with state-owned miner PT Indonesia Asahan Aluminium (Inalum) to divest 51 per cent of its unit PT Freeport Indonesia (PTFI). Inalum now control 9.36 percent PTFI shares.
Adkerson said the sale of Rio Tinto’s stake in its Indonesian unit to the government of Indonesia would be an ideal outcome for the company. The Indonesian government and Freeport are still facing off, far apart on a mutually-agreeable deal with contract renegotiation ongoing.
Likely caving in to external pressure, the government has agreed to extend PTFI special mining business permits until June 30, 2018 and its subsequent export license by Feb. 15, 2019.
Minister of Energy and Mineral Resources (MEMR) Ignasius Jonan announced that Freeport can apply for a 10-year permit extension over the near term, to extend its current one, due to expire in 2021. This means the world’s largest publicly-traded copper company could secure the privilege of extending its contract five years before it expires.
In return, the company has agreed to divest a 51 percent stake in the local unit. Freeport has also agreed to build a copper smelter by Jan 2022 at the latest.
The Phoenix, Arizona-based company has been in lengthy discussions with the government of Southeast Asia’s largest economy over a number of issues that will affect its operations in the world’s second-biggest copper mine.
Indonesia’s mining policy requires, among other, Freeport to divest its stake up to 51 per cent to local entities, build a new smelter to add value to its export commodities, if they wish to extend the existing 30-year contract.
The U.S. mining giant ships about two-thirds of the copper concentrate it produces from the Grasberg mine, while keeping the remainder to be processed domestically. This year Freeport targeting to produce copper 3.9 Billion lbs, gold: 2.4 Million ozs and Molybdenum 91 Million lbs.