PT Freeport Indonesia is gearing up to complete the construction of a copper smelter in Gresik, East Java, ahead of the government’s plan to ban the export of copper ores and concentrate in June 2023.
Chief Executive Officer of PT Freeport Indonesia Tony Wenas said that the company had secured a commitment from the chairman of Japan’s Chiyoda Corporation, stating that Chiyoda will deploy all its workforce and energy to help accelerate the smelter project.
“We hope that completion of the smelter can be sped up and we can conduct the commissioning by the end of this year,” said Wenas in a parliamentary hearing on March 27, 2023.
President Joko “Jokowi” Widodo announced the ban on raw mineral exports on January 10, 2023. The government already banned the export of nickel, followed by bauxite and then copper, which would be implemented on June 2023.
The government plans to impose sanctions if the company fails to comply with the requirement.
Freeport Indonesia is developing a smelter that can turn copper concentrate into cathodes with an annual capacity of 1.7 million tons.
The smelter construction will cost about US$3 billion. The funds for the smelter would come from a loan and the company’s equity.
Based on the latest data, Wenas said the progress of the smelter construction had achieved 56.5% by February 2023 and will achieve 92% by the end of this year.
Wenas added that Freeport believes that the physical structure or the smelter building will be completed by the end of this year.
However, Wenas said Freeport Indonesia would obey the mineral and coal law and the stipulation regulated in its special mining permit (IUPK).
His company continues discussing energy and mineral resources to see a solution for the sustainability of Freeport’s and other companies’ exports.
One year delay
Wenas said the obligation for PT Freeport Indonesia to build a copper smelter was regulated in the 2018 special mining permit (IUPK).
The license mentioned that the smelter must be constructed within five years after the issuance of the permit. At the time, Wenas said, Freeport Indonesia planned to complete the smelter by December 2023.
During smelter construction, Wenas said that Freeport faced several obstacles, including human resources issues, traffic, and covid 19 pandemic.
Wenas added that it took much work for Freeport to get workers in the early project because there were several projects around East Java. Foreman and labor suppliers can only supply workers for the smelter project quickly. After several months, the workers would move to another project.
“The other issue is that it is a massive project, there are many sub-contractors, and we cannot fully control their schedules. So when the covid pandemic spread, they changed their schedules. But now, we can handle the issue well,” Wenas added.
Because of the obstacles, PT Freeport Indonesia requests an extension or delay of the project for one year from the government.
Smelting business license extension
Wenas said that Freeport has processed and refined 1 million tons of copper concentrates through PT Smelting. However, the company must process and refine 2 million tons more of copper concentrates.
Wenas added that Freeport is building a copper smelter with 1.7 million tons production capacity in Gresik.
At the same time, the company is encouraging the extension of PT Smelting’s smelter in Gresik for additional 300,000 tons in capacity.
Plant Manager of PT Smelting Antonius Prayoga, the company’s shareholders, Mitshubishi, and PT Freeport Indonesia has agreed to increase the capacity of PT Smelting’s copper smelter from 1 million tons per year to 1.3 million per year. “We called it an expansion project,” he said.
The expansion project will cost the company US$ 250 million and will be completed by December 2023. All the funds for the expansion project came from a loan borrowed from PT Freeport Indonesia.
Upon completing the project in the first semester of 2024, the loan will be converted into shares in a debt-to-equity swap scheme.
Following the swap, Freeport will have 65 % of shares in PT Smelting from the current 39.5%, and Mitsubishi will have 35% of shares from 60.5 % of existing shares.
