PTFI shareholder Freeport-McMoRan wrote in a statement on July 22 that the funds would be used to expand an existing copper smelter and build a new one in Gresik. The former project would cost an estimated $250 million and the latter, to be developed by Japan-controlled PT Chiyoda International Indonesia, an estimated $2.8 billion.

The funds would also go toward developing a gold and silver refinery connected to the two smelters and estimated to cost another $250 million.

“Construction of the new smelter capacity would result in the elimination of export duties, providing an offset to the economic cost associated with the smelter development,” wrote the publicly-listed Arizona-based Freeport-McMoRan in the statement.

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PTFI is expected to develop the metal smelters as one of many conditions agreed to by Freeport-McMoRan for extending the permit for the Grasberg mine in Papua, which is one of the world’s largest gold and copper mines. Freeport-McMoRan also had to reduce its ownership in PTFI to 49 percent in a divestment that gave state-owned mining holding company MIND ID a controlling stake.

The Indonesian government expects four smelters in total, including PTFI’s two smelters, to be completed by 2023 as part of a bigger plan to industrialize the economy. While Freeport McMoran expects the expansion to be completed by 2023, it only expects the new smelter to be completed by 2024.

Energy and Mineral Resources Ministry Mining Director General Ridwan Djamaluddin confirmed that PTFI would receive the export duty incentive.

“There is a policy that relaxes exports during the COVID-19 pandemic. Freeport is one of the beneficiaries,” he said in a message to The Jakarta Post on Monday.

Read also: Freeport agrees to 51% divestment, other terms: CEO

The statement noted that more debt financing plans were in the pipeline for the two projects. Freeport-McMoRan would bear 49 percent of the total debt, while MIND ID would bear the remaining 51 percent.

Freeport-McMoRan’s total liabilities stood at $24.50 billion in the first half of the year, up 4.4 percent year-on-year, its financial report shows.

Freeport-McMoRan also plans to spend $1.4 billion this year to develop the underground mine in the Grasberg mine. The funds reflect 64 percent of the company’s total $2.2 billion capital expenditure allocated for this year.

Previously, PTFI has signed a US$3 billion contract to develop a copper smelter in Gresik, East Java, ending a year-long uncertainty over the miner’s downstreaming plans. 

Freeport Indonesia wrote in a statement on July 15 that it had signed an engineering, procurement and construction (EPC) contract with Japan-controlled PT Chiyoda International Indonesia (PTCII) to develop the smelter in the Java Integrated Industrial and Port Estate (JIIPE) in Gresik, East Java.