Govt asks Freeport to build a smelter in Papua

By Thomas R. Sembiring

The government has asked copper and gold miner PT Freeport Indonesia to build a smelter in Papua, aside from the one in Gresik, East Java as a requirement for the firm to continue its mining business in Indonesia.

R. Sukhyar, Director General of Coal and Minerals at the Ministry of Energy and Mineral Resources, told reporters on Tuesday that Freeport should develop the Gresik smelter by 2017 and the Papua smelter by 2020.

He noted that the Papua smelter needs to be built because Freeport?s concentrate will significantly increase after 2020 and the Gresik smelter will not have enough capacity to absorb all the production.

The proposal comes five months after Freeport signed a memorandum of understanding (MOU) with the Indonesian government that ended a six-month tax dispute and paved the way for the company to resume copper concentrate exports.

As part of July's MOU, the country's largest copper producer agreed to pay a $115 million "assurance bond" to develop a $2.3 billion smelter in Gresik by 2017. The government is now asking Freeport to build a second one in Papua.

"We have asked Freeport to build another smelter in Papua that is different than the one in Gresik," Sukhyar said.

Sukhyar also said in October next year, Freeport will offer 10.4 percent of its shares to the government as part of divestment program. This will allow the government to increase its stake in the firm to 20 percent from 9.6 percent at present.

Editing by Johannes Simbolon