Freeport agrees to build smelter, suggests new regulation

Gold and copper giant PT Freeport Indonesia has agreed to build the required domestic copper smelter which must be completed by 2022.

This was said by Secretary of the Ministry of Energy and Mineral Resources Teguh Pamudji on Wednesday following a negotiation meeting with PT Freeport. He said that the company did not say when it would start construction of the planned smelter, but has agreed that the smelter would be completed by 2022 as requested by the government.

Teguh, who is leading a government team in the negotiation talks with PT Freeport, added that the company also did not say whether it would develop the smelter on its own or in partnership with other companies. He said that existing regulation allows the company to partner with other investors in the smelter project. Arifin Panigoro, founding owner of IDX-listed PT Medco Energi Internasional Tbk, said recently that PT Amman Mineral Nusa Tenggara has been in talks with PT Freeport for possible joint utilization of smelter to be developed by Amman in West Nusa Tenggara Province. Medco co-owns Amman.

Elsewhere, Teguh said that PT Freeport, which operates the giant Grasberg mine in Papua Province, has also submitted documents, among others suggesting for the government to issue a new regulation to help ensure the stability of the company?s investment. ?Freeport has given documents that we must study. First is regarding the IUPK special mining business license, second on stability of investment, and the third regarding regulation in the form of government regulation,? he said, adding that any new regulation to be issued later by the government will not be specifically tailored for PT Freeport but would be applied for all mining firms in the sector.

The government and PT Freeport, a subsidiary of US-based Freeport McMoRan Inc, has been locked in negotiation talks since February of this year after the government introduced a new regulation in January, which has been objected by the gold and copper giant. The ongoing negotiation process is expected to be concluded in October.

The government in January of this year issued a new regulation allowing mining firms to continue export of mineral concentrates for another five years under certain conditions including the conversion of their mining permit status from contract of work (CoW) to special mining business license (or IUPK), express commitment to build domestic smelter, as well as requiring foreign controlled firms to divest up to 51 percent of its interest to Indonesian investors. PT Freeport, whose current CoW is set to expire in 2021 and is seeking for an extension until 2041, opposes the requirement to convert the CoW into IUPK. It will only agree to the conversion as long as the IUPK contains similar fiscal and legal terms as set out under the CoW to help ensure its long-term investment stability, a request that has been turned down by the government, triggering a dispute that has led both sides to hold the ongoing negotiation process. (*)