T

he Energy and Mineral Resources Ministry hinted that it would likely accommodate the Papua administration'€™s wish to ask copper miner PT Freeport Indonesia to build a smelter locally while continuing the development of another smelter in East Java.

Following a meeting on Friday with the governors and regents of several Papuan regencies whose areas cover Freeport'€™s mining site, Energy and Mineral Resources Minister Sudirman Said said he planned to visit Papua to assess the availability of infrastructure to support a copper smelter development.

'€œIf there are better preparations, we are inclined to support [smelter] construction in Papua because it will cut the time needed to transport concentrate to smelters in other areas. However, the construction of a Papuan smelter can also be parallel with one in Gresik [East Java],'€ Sudirman told reporters after the meeting.

A definitive decision on the construction of the smelter, the minister said, would be announced after his visit to Papua, which is set for this week.

Papua governor Lukas Enembe said that infrastructure, including road access and electricity supply, and the plots of land needed had been prepared to support development of a smelter in Papua, the country'€™s easternmost province where Freeport Indonesia'€™s Grasberg mining site is located.

'€œWe have voiced the Papuan people'€™s aspirations. We have mentioned 17 points that must be satisfied by Freeport Indonesia for the development in Papua,'€ Lukas said.

He added that despite the fact that Grasberg was in Papua, the people in the province got few benefits from the mining activities. Lukas highlighted that the poverty rate in Papua had reached 31 percent.

Freeport Indonesia, a subsidiary of US-based Freeport-McMoRan Inc., has been operating the Grasberg mine since the 1970s. The company sells most of the copper concentrate produced from its Grasberg operation overseas and only sends roughly 40 percent of its production to PT Smelting Gresik, which operates the only copper smelter in the country. Freeport Indonesia has a 25-percent stake in Smelting Gresik.

Following the implementation of the 2009 Mining Law, the government started on Jan. 12 last year to ban the export of mineral ore. Consequently, Freeport Indonesia has to process all of its semi-finished copper concentrate into the end product, copper cathode, in domestic smelters.

However, as Smelting Gresik'€™s capacity is limited and cannot process all of Freeport Indonesia'€™s production, a new smelter must be built so that mining firms will be able to comply with the downstream policy under the 2009 Mining Law.

After a prolonged process, the copper miner announced in late January that it has secured 80 hectares of land in Gresik that will be used for the US$2.3 billion smelter project. The location belongs to fertilizer firm PT Petrokimia Gresik and is adjacent to the smelter operated by Smelting Gresik.

The announcement sparked protests from Papuan communities as they expected Freeport Indonesia to build a smelter in Papua so that the company can contribute more to the province'€™s development.

Development of a smelter in Gresik is seen as the most feasible plan because of infrastructure availability and a better waste management plan in which sulfuric acid can be absorbed by Petrokimia Gresik. The availability of infrastructure and other facilities is expected to be able to keep the new smelter development on track and be finished in 2017. Under the regulation, 2017 is the deadline until which Freeport Indonesia can continue exporting copper concentrate. After the deadline, a full ban on mineral ore exports will be implemented.

'€œDevelopment in Gresik is more feasible for now. However, as the minister said, the development of the Gresik smelter can be undertaken simultaneously with a long term plan of a development in Papua,'€ said R. Sukhyar, the director general for mineral and coal at the Energy and Mineral Resources Ministry.

The smelter development is also a point discussed in the renegotiation of a contract of work between the government and Freeport Indonesia. The government is working to make adjustments to old contracts of work held by mineral and coal miners, partly to increase their contributions to the country and to comply with the 2009 Mining Law.