Freeport obtains extension of export permit

Gold and copper giant PT Freeport Indonesia has obtained assurance from the government that its export permit would be extended despite slow progress in developing the required domestic smelter.

Director General of Mineral and Coal R. Sukhyar said Friday the Ministry of Energy and Mineral Resources would issue the necessary export recommendation letter for PT Freeport to allow the company obtain extension of its current export permit, which expires January 25, from the Ministry Trade for another six months. PT Freeport will be given an export quota of 756,300 tons of copper concentrates.

Sukhyar said that the government would extend the export permit of PT Freeport as the company has decided on the specific location for the planned smelter.

PT Freeport on Wednesday signed an Mou with state-owned fertilizer giant PT Petrokimia Gresik to lease an 80 ha of land in Gresik, East Java, from the latter company for the location of the planned copper cathode smelter. The MoU was made after Minister of Energy and Mineral Resources Sudirman Said warned PT Freeport that the government would suspend the export permit of the company if it fails to show progress over the planned smelter project by January 25 particularly with regards to land procurement.

Sukhyar said that although PT Freeport has yet to acquire the necessary land, the company has deposited US$130,000 in a national bank, or about 2 percent of the annual land lease, as a form of commitment that it was serious in implementing the land lease MoU.

PT Freeport plans to build a copper cathode smelter with a capacity to process 2 million tons of copper concentrates per year in Gresik, near the smelting facility operated by PT Smelting Gresik, which is partly owned by the company and process a small portion of its copper concentrates. The requirement to build the domestic smelter is stipulated by the 2009 Mining Law as the country seeks to obtain greater value added from its mineral commodities.

The government in January of last year banned the export of mineral ores, pushing miners to build domestic smelters. But semi-processed products such as copper concentrates are still allowed for export until 2017, when smelters such those to be build by PT Freeport are expected to be already completed.

The 2009 Mining Law also requires the amendment of PT Freeport existing mining contract of work. The company in July of last year signed an MoU agreeing to the six main points of changes to the contract as proposed by the government. The company is supposed to conclude amending the contract by January 24.

Sukhyar said the Ministry of Energy and Mineral Resources has also decided to extend the MoU for another six months, thus giving more time for PT Freeport, a subsidiary of US-based Freeport McMoRan Copper and Gold Inc, to amend the contract. Sukhyar, however, added that additional requirements have been included including pushing the company to develop downstream industry in Papua, where it operates the Grasberg mine, one of the world?s largest gold and copper mine.(*)