Freeport suspends smelter project, demands certainty over future operations

The government has so far been unable to get progress report of copper smelter project promised by gold and copper giant PT Freeport Indonesia as the August 17 deadline to evaluate the progress of the project approaches, Kontan reported on Tuesday.

The government has previously said that if the company fails to make significant progress in developing the domestic smelter project based on the evaluation, the company?s copper concentrates export permit will be revoked.

The paper quoted PT Freeport Spokesman Riza Pratama as saying that the company will only resume construction of the smelter project, located in Gresik, East Java, once the government approves request for the extension of the company?s current mining contract until 2041. The current contract is set to expire in 2021. ?So that we?ll be able to continue investment in underground mine worth US$15 billion and in smelter project $2.3 billion, divestment of 51 percent shares,? he said.

Riza added that the company opposes the government?s plan to revoke its export permit if it fails to make significant progress in the smelter project. ?In our contract of work, we?re not banned from making export,? he said.

The government issued export permit for PT Freeport on February 17, 2017. According to new regulations issued earlier this year, miners will be allowed to continue export of mineral concentrates for another five years under certain conditions including commitment to develop domestic smelters. The smelter projects will be evaluated every six months by independent team. Miners failing to show at least 90 percent progress in their smelter projects during the six-month evaluation, will risk their export permits revoked.

PT Freeport, a local subsidiary of US-based Freeport McMoRan Copper Inc, which operates the giant Grasberg gold and copper mine in Papua Province, has been engaged in negotiations with the government over disputes resulting from the introduction of new government regulations earlier this year. The negotiation is targeted to be concluded in October of this year.

PT Freeport among other things has demanded its current mining contract of work to be extended until 2041 as it plans to make multi-billion dollar investment in underground mine operations and smelter project. Meanwhile, the government is only wiling to extend the contract until 2031 in the first phase. (*)