Amahl S. Azwar, The Jakarta Post, Jakarta | Business | Wed, August 14 2013, 12:05 PM
PT Freeport Indonesia, the local subsidiary of American mining giant Freeport McMoRan Copper and Gold Co, will supply copper concentrates to local smelting plants in a bid to comply with restrictions on unprocessed ore exports.
The ban, to take effect in 2014, aims at giving added value to the country’s downstream mining sector.
Freeport Indonesia, which operates the Grasberg gold and copper mine in Papua, signed a memorandum of understanding (MoU) with two local firms PT Indosmelt and PT Indovasi Mineral Indonesia in Jakarta on Tuesday.
“This MoU signing marks Freeport Indonesia’s commitment to supporting the government’s policy,” said Freeport Indonesia president director Rozik B. Soetjipto in a press conference.
He added, however, Freeport would still demand the government to postpone the restriction plan as the two local smelting plants were only expected to begin production in 2017.
Indovasi Mineral’s US$1.5 billion- smelting plant, planned to be located either in Tuban or Gresik in East Java and is expected to begin construction by the end of 2014 with an annual production of around 200,000 tons of copper cathode estimated to begin in 2017.
Meanwhile, Indosmelt’s $1.5 billion-smelting plant in Maros, South Sulawesi, also expected to begin production in 2017 and is estimated to produce around 120,000 tons of copper cathode.
Currently, Freeport Indonesia allocates 40 percent of its annual production of around 2.5 million tons of copper concentrates to local smelter belonging to PT Smelting in Gresik, of which Freeport owns 25 percent of its stake.
PT Smelting currently produce 300,000 tons of copper cathode per year.
Rozik said that all of the copper concentrates the company produce annually could be allocated domestically should the two smelting plants begin production in 2017.
However, ahead of the government’s plan to fully ban raw mineral ores export in 2014, Rozik said the company would still ask for “flexibility”, citing that it could not comment yet on the fate of existing long-term contracts with international buyers as it still seeks the government’s understanding on the matter.
Separately, the Energy and Mineral Resources Ministry’s coal and minerals director general Thamrin Sihite said the government would monitor and evaluate the MoUs in relation to Freeport’s proposal for the government to loosen up the planned 2014 ban.
“The government has yet to get the details on the their plan with the MoUs. Of course we will evaluate their requests,” he said.
It was also previously reported that PT Freeport Indonesia considered processing its mineral ores at local existing smelters so it can continue exporting.
Freeport, along with PT Newmont Nusa Tenggara, has refused to establish its own smelters because it would not be economically feasible.