Freeport audit team recommends output cut, royalty change, more supply to Smelting

A joint audit team of copper and gold firm PT Freeport Indonesia (PTFI) has completed its task with several recommendations calling for an improvement in production, a change in royalty payment system and a tighter control on the environment management. Kompas reported Monday.

 

Energy and Mineral Resources Ministry’s Director of Technics and Environment Witoro Soelarmo said in Jakarta on Sunday that the recommendations had to be further discussed with PT Freeport because several points were different from those contained in the contract.

 

On production, PTFI is advised to reduce its ore production from 300,000 tons per day as mentioned in the contract to between 200,000 tons per day and 250,000 tons per day.

 

Director General of Mineral, Coal and Geothermal Resources Simon Sembiring said that it is possible for Freeport to reduce its production because its current average output is les than 250,000 tons per day.

 

The team also recommended the increase in the amount of copper concentrates processed domestically by boosting the smelting capacity of PT Smelting in Gresik, East Java , to which Freeport Indonesia supplies 30 percent or around 660,000 tons of copper concentrates per year.

 

The team suggested the increase in the receiving capacity of PT Smelting to between 40 and 50 percent.

 

The government first awarded PTFI the contract in 1967 and extended the contract in 1991 for 30 years, with mining areas of some 202,950 hectares. The company produced 4.12 million tons of copper concentrates valued at US$664.32 million between 1973 -1990. In 1991 – 2005, its production rose to 28.43 million tons with total output value of US$8.74 billion.

 

The team has also suggested the change in the royalty payment system. The royalty, which under the existing system, is paid every three months on overage, should be paid per transaction.

 

In 2006, PTFI paid US$1.6 billion or around Rp 14 trillion in several kinds of taxes, including $146 million in royalty.

 

The team also suggested the use of sulphur in the smelting be subject to royalty given that the use of sulphur reaches around 600,000 tons per year.

 

On environment, the team proposed the control on the waste start from the point of Kelapa 5 and Pandan 5  to know whether the waste pollute the environment or not.

 

The audit team, which was established by the government in 2006, consists of representatives from the Ministry of Energy and Mineral Resources, the Office of State Minister of Environment and the Customs and Excise Office.

 

Meanwhile, PTFI’s spokesman Mindo Pangaribuan said that it might be difficult for Freeport to meet the demand for increase in copper concentrate supply to PT Smelting because the company had signed long-term contracts on copper concentrates with smelters overseas.

 

He said that the suggested change in the royalty payment system was no problem because it is already in compliance with the company’s financial report announced per three months. (Bernard)