Smelter investors complain lack of copper supply

By Tri Subhki R

Two companies PT Indosmelt and PT Nusantara Smelting Corporation planning to build domestic copper cathode smelters protested the government?s intervention directing PT Freeport Indonesia (PTFI) and PT Newmont Nusa Tenggara (NNT), the country?s largest copper concentrate producers, to reallocate their output to another planned smelter.

Indosmelt and Nusantara Smelter had earlier signed a conditional sales and purchase agreements (CSPA) with PTFI and NNT for the latter firms to supply copper concentrates to the two former firms? planned smelters.

But recent developments suggest that PTFI and NNT, which already allocates 1.2 million tons of their combined output to PT Smelting Gresik (the country?s only copper smelter), seem to disregard the CSPAs as the government directs them to allocate the remaining 1.6 million tons output (of total combined production of 2.8 million tons) to a planned copper cathode smelter to be built by PTFI and state-controlled mining firm PT Aneka Tambang (Antam), which will have capacity 400,000 tons per annum.

?We, Indosmelt and Nusantara Smelting, are harmed materially and immaterially due to the government?s preference on Freeport-Antam smelter agreement,? PT Indosmelt?s President Director Natsir Mansyur said in a joint press conference with Nusantara Smelting Wednesday.

He also urged government ? in this case Ministry of Energy and Mineral Resources (MEMR) ? to be fair in delivering the copper supply allocation for copper smelter companies.

Based on the CSPAs, PTFI and NNT agreed to supply 800,000 tons of copper concentrate to produce 200,000 copper cathode for Nusantara Smelting. In addition, the two giant mining firms also agreed to supply 500,000 tons of copper concentrate to produce 100,000 tons of copper cathode and 9 tons of gold for Indosmelt.

Natsir and Nusantara Smelting?s Director Juangga Mangasi said that they do not have any objection to Freeport-Antam smelter agreement as long as Freeport and Newmont respect the signed CSPA. ?We cannot start building the copper smelter if there is no definitive contract of copper concentrate supply,? Juangga said, suggesting that the two planned smelters may not be completed in 2017 as originally scheduled.

Juangga also urged the government to play its role as regulator in the issue and not to have any preference to certain party. MEMR facilitates the discussion of copper smelter and concentrate supply with all the stakeholders, including Freeport, Newmont, Antam, Indosmelt and Nusantara Smelting.

Natsir added that Freeport may take option to end the CSPA by business-to-business approach if Freeport wants to carry on the agreement with Antam. ?But Freeport does not want to scrap the CSPA as well,? he said. Natsir did not rule out the possibility to file a legal case if there is no solution to the issue.

Editing by Reiner Simanjuntak