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Freeport gets recommendation despite slow smelter progress
The Energy and Mineral Resources Ministry has granted gold and copper miner PT Freeport Indonesia (PTFI) a new export permit recommendation that will be valid for one year until February 2019, just a day before the company’s old permit expired
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he Energy and Mineral Resources Ministry has granted gold and copper miner PT Freeport Indonesia (PTFI) a new export permit recommendation that will be valid for one year until February 2019, just a day before the company’s old permit expired.
PTFI, the local affiliate of United States-based mining giant Freeport-McMoRan (FCX), needed to obtain the recommendation before submitting a proposal to the Trade Ministry to get a new export permit. Such a recommendation is given to miners that are able to meet the development target of their new smelters.
PTFI has pledged to develop a new smelter worth US$2.2 billion inside the Java Integrated Industrial and Ports Estate (JIIPE) in Gresik, East Java. The facility will have an annual input capacity of 2 million tons of copper concentrate and output capacity of 460,000 tons of copper cathode and 5,800 tons of anode slime, among other products.
Bambang Susigit, the Energy and Mineral Resources Ministry’s minerals business supervision director, said the development progress of PTFI’s new smelter in the past six months had reached 2.43 percent, slightly surpassing the original target of 2.34 percent.
“Today, we have discussed this matter and eventually agreed to give PTFI another export permit recommendation that will be valid until February 2019,” Bambang told The Jakarta Post on Thursday, just a day before PTFI’s old permit expired.
“However, the Trade Ministry is only able to process the export permit on working days. So, since Friday is a public holiday [Chinese New Year], the export permit might only be issued next Monday or Tuesday at the latest.”
The new recommendation allows PTFI to export 1.66 million wet metric tons (wmt) of copper concentrate within the next year, up nearly 50 percent from the previous quota of only 1.11 million wmt, of which 97.64 percent had been realized by the end of January.
Bambang said his side initially turned down PTFI’s proposal to get a new export permit recommendation, through which the company claimed its new smelter development progress had reached 15.6 percent.
PTFI came out with that figure because it took into account the $115 million in funds it had deposited as collateral to the government, as well as the land it would use in the JIIPE.
Nonetheless, Bambang said PTFI could not take into account the collateral funds that would eventually be returned to the company once the smelter development progress reached 35 percent. Moreover, he said the land used for the new facility was owned by PT Berkah Kawasan Manyar Sejahtera as the operator of JIIPE, not PTFI.
The Energy and Mineral Resources Ministry started its evaluation process after PTFI revised and resubmitted its proposal on Feb. 6.
PTFI aims to sell 1.2 billion pounds of copper and 2.4 million ounces of gold in 2018. Last year, the company was only able to sell 981 million pounds of copper, a decrease of 6.92 percent year-on-year, and 1.54 million ounces of gold, up 46.11 percent yoy.
The downward trend in PTFI’s copper sales was triggered by temporary disruptions in the company’s operations at the giant Grasberg mine in Papua during the first half of 2017, when its dispute with the government just started.
As part of the agreement to extend PTFI’s operating permit, the government has demanded that FCX increase Indonesian ownership in PTFI from the current 9.36 percent to 51 percent.
State-owned mining holding company PT Indonesia Asahan Aluminium (Inalum) has subsequently been tasked with leading a consortium of Indonesian investors that will acquire PTFI’s majority stake by June at the latest.
Therefore, Inalum president director Budi Gunadi Sadikin said late last year his side should also have a say in PTFI’s new smelter development.
Budi said he was still considering several options, including to develop the new smelter near the Grasberg mine in Papua or jointly construct such a facility with fellow gold and copper miner PT Amman Mineral Nusa Tenggara in Sumbawa, West Nusa Tenggara.
“One thing is for sure, we will also need to develop a precious metal refining facility to process the copper cathode into pure copper and the anode slime into gold or silver. The investment for this facility might only stand at US$100 million,” Budi said.
