The second-biggest copper miner in the world, PT Freeport Indonesia (PTFI), expects to start the construction of a new smelter, processing and refining plant in Java Integrated Industrial and Port Estate (JIIPE), Gresik, East Java in August, local media reported today (02/19) - Photo by Freeport Mcmoran

JAKARTA (TheInsiderStories) –  U.S miner Freeport Mcmoran Inc. (NYSE: FCX) prepared capital expenditure US$2.1 Billion in this year to develop project in Indonesia and other countries. The company need up to $20 billion to develop Grasberg gold and copper mine in Papua province until 2031.

Based on his presentation in one seminar on Tuesday (27/02), Vice chairman, President & CEO Richard C. Adkerson explained, 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.

In his speech, 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.

The government has stuck to its guns, aiming to complete negotiations with Freeport, focusing on five underlying issues, by Oct. 10. Freeport has also stubbornly refused to budge, and as of this writing there has been no significant progress in negotiations.

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.

Jonan has suggested the value of the 51 per cent stake to be divested by PTFI to be worth around US$4 billion. State-Owned Enterprises Ministry has set up a holding company to purchase Freeport’s shares joined with Employees Social System Security (BPJS Ketenagakerjaan), Papua Provincial Government, and districts.

The consortium stated that Inalum will receive 55 per cent of the share, BPJS Ketenagakerjaan will receive 25 per cent, and regional government will be given 20 per cent of the 41.64 per cent shares of PTFI.

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.