Freeport proposes public-private partnership to develop smelter

PT Freeport Indonesia has proposed a public-private partnership (PPP) scheme for the construction of domestic smelter as required by the government, Coordinating Minister for the Economy Hatta Rajasa said.

Hatta said on Wednesday the government would review the Freeport Indonesia proposal.

Freeport Indonesia, which operates the giant Grasberg gold and copper mine in Papua, is the largest copper concentrate producer in the country. It supplies about 40 percent of its copper output to PT Smelting, the only copper smelter in the country, while the remainders are exported. The company has teamed up with mining firm PT Aneka Tambang to carry out feasibility study for a planned new copper smelter as the government has required copper producers to complete domestic smelter by 2017 when concentrate export would be finally banned.

The obligation to build domestic smelter is also part of the six points of the ongoing contract renegotiation between the government and miners operating in the country. The contract renegotiation has been mandated by the 2009 Mining Law.

Hatta said that the contract renegotiation with Freeport has yet to be completed to date due to lingering sticking points including the smelter obligation, royalty hike, and divestment obligation.

Hatta said that Freeport has only agreed to a royalty tariff of 3.78 percent, while the government wants 10 percent. In terms of divestment obligation, Freeport is willing to divest 20 percent stake, while the government wants 51 percent divestment. (*)