PT Newmont Nusa Tenggara (NNT), one of Indonesia’s largest copper and gold mining companies, agreed Wednesday to supply part of its copper concentrate production to a local smelting plant as the government’s ban on exporting raw ore will come into force next year.
Under the deal signed in Jakarta, Newmont agreed to provide copper concentrate to PT Nusantara Smelting, which plans to build a copper smelting plant.
NNT president director Martiono Hadianto said that the agreement was part of the company’s commitment to comply with all the obligations imposed on mining companies by the 2009 Mining Law. “We will be active in fulfilling the government’s policy,” Martiono said.
Under the 2009 Mining Law, mining companies are required to process their raw ore in domestic smelters starting next year. The law was enacted as part of the country’s attempt to boost downstream industry.
Although the law was enacted years ago, only a small number of smelter projects have been started or established. Major copper miners such as Newmont and Freeport Indonesia have earlier said that building their own smelters would be economically unfeasible. The policy has also been widely criticized overseas, especially by China and Japan, major buyers of Indonesian raw minerals such as copper and nickel.
Despite a commitment to supply the local smelting plant, it remains uncertain whether Newmont will be allowed to export a portion of its raw ore next year. “We’ll see later,” Energy and Mineral Resources Deputy Minister Susilo Siswoutomo said via text message.
Industry Minister MS Hidayat, who attended the signing ceremony, said that with its agreement to process its copper concentrate in a local smelter, Newmont had showed its dedication to complying with the law.
The government has said that companies that have indicated a strong commitment to building or supplying local smelters would still be allowed to export raw ore next year despite the ban.
Nusantara Smelting’s factory, which will be located either in East Kalimantan or in East Java, is estimated to need US$1.2 billion in total investment, president director Melvin Korompis said. The company is now conducting a feasibility study for the construction of the smelter. The project should commence in late 2014.
The smelter is designed to be able to produce 200,000 tons in copper cathode per year from a supply of 800,000 tons of concentrate. “The supply from Newmont will not be enough. We will need an additional supply of about 600,000 tons from companies like Freeport. Otherwise we can’t proceed with the project,” Melvin said during the signing ceremony.
PT Freeport Indonesia, a subsidiary of US mining firm Freeport-McMoran Copper and Gold, has expressed its reluctance to build its own smelting facility in the country. In addition to Nusantara Smelting, Newmont has also expressed its commitment to provide copper concentrate supply to other smelting companies, PT Indosmelt and PT Indovasi Mineral Indonesia. Indosmelt plans to build a copper smelter in Maros, South Sulawesi and Indovasi in Cirebon, West Java.