Freeport says smelter project hinges on contract extension

President of gold and copper giant PT Freeport Indonesia, Chappy Hakim told lawmakers on Wednesday that the fate of the company?s planned US$2.2 billion copper smelter project in Gresik, East Java, will depend on certainty of the extension of the company?s mining contract by the government.

Speaking during a hearing with the House of Representatives Commission VII on energy and mining, Chappy reiterated that the contract extension will help ensure the availability of the required funding for the project.

?There are a number of considerations that must be settled first among others certainty of contract extension which is closely linked with funding availability,? he said.

PT Freeport, a local unit of US-based Freeport McMoRan Copper & Gold Inc, plans to build a copper smelter in Gresik as the government plans to no longer allow the export of copper concentrates starting January 12, 2017. But the company has yet to start construction process. Of the estimated $2.2 billion investment, so far only about $212.9 million has been spent mostly for land preparations.

PT Freeport?s mining contract is set to expire in 2021. Director General of Mineral and Coal Bambang Gatot Ariyono said that according to existing government regulation, the company can only apply for contract extension two years prior to its expiry or in 2019. But the company apparently declines to make new large investment spending including for the smelter project without certainty on the fate its current contract.

The government is planning to revise the regulation, which earlier reports said would allow mining firms to ask for contract extension five year prior to expiry. The government is also in the process of revising the mineral export ban policy that would allow mineral concentrates producers such as PT Freeport to continue export after January 12, 2017, pending the completion of their smelter projects in three-five years time. (*)