T

he House of Representatives is pushing the government to make copper giant PT Freeport Indonesia establish its smelter in Papua, increasing concerns over whether the company will be able to complete development by 2017 when a full ban on ore exports will be implemented.

The House'€™s leaders brought up the Papua smelter issue during a meeting with President Joko '€œJokowi'€ Widodo on Monday.

The House'€™s deputy speaker, Agus Hermanto, claimed that the President had agreed that Freeport Indonesia should build its smelter close to its mine in Papua instead of following its plan to build in Gresik, East Java.

'€œI say many problems will arise if the smelter is built in Gresik,'€ Agus said after the meeting, without elaborating.

Freeport Indonesia, a subsidiary of US-based giant miner Freeport-McMoRan Inc., is required to build a copper smelter in the country as a consequence of the 2009 Mining Law that requires mining firms to process and refine their minerals in domestic facilities.

Recently, the company said that it had signed a memorandum of understanding (MoU) to lease 80 hectares of land belonging to PT Petrokimia Gresik, located adjacent to the only copper smelter in the country, operated by PT Smelting Gresik.

The governor of Papua expressed his disappointment last week with Freeport Indonesia'€™s decision to choose Gresik for the US$2.3 billion-smelter location.

House speaker Setya Novanto said that building a smelter in Papua would increase Freeport Indonesia'€™s contribution to the country and the Papuan residents.

'€œThe President agreed with us. Freeport has only contributed Rp 6 trillion [US$472.58 million] so far, while the government has disbursed Rp 35 trillion in special autonomy funds [for Papua],'€ Setya said.

Freeport Indonesia argued that it chose the location for the available supporting infrastructure. Moreover, according to Freeport Indonesia president director Maroef Sjamsoeddin, acid sulfur as waste from the copper smelter could be absorbed by Petrokimia Gresik if the smelter was built there. A similar strategy could not be taken in Papua as no fertilizer firm existed there.

Smelters built by mining firms must be completed by 2017 if the miners want to keep their businesses alive.

According to a regulation issued in January last year, the government will stop the relaxation of the ban on mineral ore exports in 2017. The full ban on mineral ore exports should have started last January. However, following concerns over massive layoffs as no smelters were ready to absorb production, the government under then president Susilo Bambang Yudhoyono issued a regulation allowing semi-finished product, such as copper concentrate produced by Freeport Indonesia, to continue be exported until 2017. After the deadline, mining firms will only be allowed to export processed metal.

Meanwhile, Energy and Mineral Resources Minister Sudirman Said told reporters after the Monday meeting that the House'€™s suggestion would be discussed during negotiations with the company.

'€œWe will try hard to accommodate all interests,'€ Sudirman said.

Earlier, during a meeting with the House of Representatives'€™ Commission VII overseeing energy, Sudirman told legislators that forcing smelter development in Papua would only give Freeport Indonesia a chance to miss the 2017 deadline because development there would take more time. The ministry preferred to suggest that Freeport Indonesia contribute to the development of the downstream industry in copper to contribute to development in Papua.