Minister of Investment/Head of Investment Coordinating Board Bahlil Lahadialia said the government is waiting for the final revision of the government regulation No. 96/2021 that will allow PT Freeport Indonesia (PTFI) to secure early extension of its special mining business permit after 2041.
“We are just waiting for the government regulation. The Freeport’s mining permit extension is almost final,” he said to reporters on April 29,2024.
Bahlil said Freeport’s production will reach its peak in 2035. Currently, the company manages the underground mining. If the company does not do the exploration now, it cannot continue its production in 2035 because the underground exploration will take 10 to 15 years.
“So,if we do not extend the permit now, we have to be ready that in 2040 Freeport cannot do the exploration,” he said.
He added that currently Freeport is owned by Indonesia. So it is reasonable for the government to grant extension for Freeport’s permit. At the same time, the extension will give an opportunity for Indonesia to increase its share at the company by 10 percent at the very cheap price. So, in the future, Indonesia will have 61 percent of Freeport’s shares.
PTFI signed the Contract of Work (CoW) in 1976 for 30 years and should have ended in 1997. Before the contract expired, PTFI discovered a bigger gold reserve at Grasberg mine. The company then submitted a second contract extension in 1991. The second contract has a clausal on divestment of 51 percent of the company’s shares to the Indonesian government.
After a long negotiation, in 2018, Freeport-McMoRan announced that it divested its ownership in PTFI so that Indonesia could own 51 percent shares of the company. In return, the CoW was replaced by a Special Mining Business License (IUPK) with the mining right to 2041 and Freeport will build a new smelter by 2022.
Grasberg mine has three mining operations: Open pit, the Deep Ore Zone underground mine and the Big Gossan underground mine. According to former Minister of Energy and Natural Resources, Ignasius Jonan, the Grasberg gold mine has 23.2 million ounces of gold reserves per December 31, 2017.
Bahlil also said granting PT Freeport Indonesia extension of export permit after May 2024 is part of the measures that the government should consider and do. Because based on the regulation, a company seeking to secure an export permit needs to build a smelter.
A company that does not build a smelter will no longer be allowed to export their concentrates or be subject to penalties.
“In the case of Freeport, they have built the smelter. It ‘s completed,” Bahlil said.
In May 2024, the smelter will complete its Commercial Operation Date. However the industrial factory /smelter cannot directly reach its peak to 1.7 millions tons as soon as it is built. Bahlil said the smelter will start with a production capacity of 30 percent first, then 40 percent before it reaches its peak in December 2024 based on the plan.
As reported by cnbcindonesia.com, Freeport Indonesia President Director Tony Wenas said the proposed extension of the copper concentrate export license is related to the operation of the new copper processing and refining facility (smelter) in the Java Integrated Industrial and Ports Estate, Gresik, East Java.
Freeport’s new smelter is scheduled to start operating in May 2024, and is scheduled to reach its full capacity in December 2024.
Thus, the copper concentrate that has been produced cannot immediately be fully absorbed by the new smelter.
If concentrate exports are stopped, while domestic smelters have not been able to fully absorb, it is feared that it will create a buildup of stock and could have an impact on reducing the production capacity of concentrates and ores.“It is hoped that we can continue to export until the smelter is fully operational in December 2024,” Tony said last December.
If exports stop, his party is also concerned that this could also have an impact on reduced state revenue.
“State revenue could be reduced by 40 percent,” he said, while adding that his party had proposed an extension of the copper concentrate export license after May 2024.
