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PrintFreeport Indonesia, the local unit of US mining giant Freeport-McMoRan Copper & Gold, set a plan on Monday with Indonesian state-controlled miner Antam to conduct a study for a joint $2.2 billion copper smelter as part of efforts to comply with new domestic processing requirements.
“The $2.2 billion [investment estimate] is from our previous study,” said Roziq Soetjipto, Freeport Indonesia’s president director, after signing the memorandum of understanding between the two companies in Jakarta on Monday.
He was referring to an earlier study carried out by Canadian consultancy Hatch Engineering.
The new study, Roziq said, would include Antam in developing supporting facilities and infrastructure for the smelter and may take three months to complete.
Should the outcome be positive, Freeport Indonesia and Antam will follow up with a more concrete plan, Roziq said.
Tato Miraza, Antam’s president director, welcomed the cooperation and said his firm was perfectly placed to benefit the US miner. “Our experience shows that we can potentially create value [for the project],” Tato said.
He did not say when the construction of the smelter would start as it would depend on the results of the study, but he said constructing smelters could take between two and three years.
Antam has been working on various smelter projects, including a $500 million chemical-grade alumina facility in Tayan, West Kalimantan.
Freeport Indonesia has identified four possible locations for the planned smelter, of which three are in the East Java city Gresik, north of the provincial capital Surabaya, where an affiliate copper smelting company, PT Smelting, already runs the country’s only copper smelter.
Another possible location is in Amamapare, a port town in Papua, Roziq said.
The smelter can produce 300,000 metric tons of copper cathode per year and needs around 1.2 million metric tons of concentrates to produce the planned copper cathode, he said.
Roziq also said that Freeport Indonesia hoped other companies, like state-owned fertilizer producer Petrokimia Gresik (Petrogres) and state-controlled cement maker Semen Indonesia would be interested in the project.
Petrogres’s fertilizer plant in Gresik is located adjacent to thesmelter owned by PT Smelting. Petrogres has been utilizing sulfuric acid from the smelter operated by PT Smelting, which is 25 percent controlled by Freeport Indonesia.
Sulfuric acid is a smelter by-product used to produce fertilizer.
Freeport Indonesia has previously warned its operations in Indonesia could suffer unless it is granted exemption from paying taxes for concentrate exports.
Freeport Indonesia’s copper concentrate meets requirements for exports until 2017, when a complete ban will be enforced.
However, the government has imposed a gradual export duty that could burden the company with a 60 percent tax bill by 2016 as the government is keen to encourage miners to process ore in-country.
Roziq declined to comment on the ongoing negotiations with the government, and would not speculate on whether the company would be granted its request.
Antam, although it already has a ferronickel smelter, is also at risk of being impacted by the mineral ore export ban as its nickel ore exports still make a sizeable contribution to its total revenue.
The company has requested the government allow it to continue to export its nickel ore, as income from the ore is needed to help finance its capital-intensive smelter projects.
Tato said that should the government stick to the policy to ban nickel ore exports, then Antam would support the policy, adding that it had already stopped nickel ore exports.
After the mineral ore export ban was introduced in January, Indonesia’s Mineral Entrepreneurs Association, or Apemindo, a trade body, filed for a judicial review of the ban with the Constitutional Court.
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