PTFI to partially resume production soon

Courtesy of Freeport

Gold and copper giant PT Freeport Indonesia (PTFI) plans to partially resume mining activities and production of copper concentrates at its mill in Papua Province on March 21, reports said on Friday.

PTFI Spokesman Riza Pratama was quoted as saying that the copper concentrates will be supplied to smelter operated by PT Smelting Gresik, in Gresik, East Java Province, which since March 2 has resumed operation after it obtained recommendation letter from the Ministry of Energy and Mineral Resources to export anode slime.

Riza, however, said that PTFI has yet to be able to fully resume production activities as the company has been unable to export copper concentrates since January 12 of this year amid lingering dispute with the government over new export policy.

PTFI, which has a production capacity of 2.5 million tons of copper concentrates per year, allocates about 40 percent of its copper concentrates output to PT Smelting, while the bulk 60 percent of the output is allocated for export markets including Spain, South Korea, China, India, the Philippines, and Japan. PTFI owns 25 percent stake in PT Smelting.

?The mill in Grasberg will resume operation on March 21,? Riza told the media as quoted by Kontan. ?Production will only be 40 percent in line with the capacity of PT Smelting.?

PTFI has been forced to stop production of copper ores and concentrates as the company has been unable to export the output, causing its three stockpile facilities in Papua, each with capacity of 40,000 tons, to be fully filled. As a result, the company has been forced to suspend some of its permanent workers. Meanwhile, workers of contractors have been laid off as their contracts have also expired.

PTFI employed around 33,000 workers. According to labor office of Mimika regency in Papua, more than 1,500 workers have either been laid off or suspended. Around 1,400 workers hired by contractors have been laid off, while the remainders are permanent workers of the company which have been suspended.

Riza said that because the company has been unable to fully resume production activities, suspension of workers and cutting down of investment will remain in place as part of efficiency measures. He said that investment could be reduced by up to 50 percent, which means cutting down spending on local contractors and suppliers.

PTFI has been engaged in dispute with the government following the introduction of a new Government Regulation No 1/2017 in January of this year, which allows miners to continue export of mineral concentrates including copper concentrates for another five years but under certain conditions including requirement for the miners to convert their mining permit status from mining contract of work (COW) to special mining business license (or IUPK). While PTFI agrees to convert the COW into IUPK, the company demands the IUPK to have similar legal and fiscal terms as the COW, a request which has been rejected by the government.

The government hopes to be able to complete ongoing negotiation with PTFI management within the next six months. PTFI?s parent US-based Freeport McMoRan Inc last month warned the company would go to international arbitration to settle the dispute if no agreement is reached with the government.

Meanwhile, Kontan quoted a source as saying that a number of local business tycoons such as Peter Sondakh have been engaged in talks to acquire PTFI. Peter and Riza declined to comment. (*)