Three mining companies are facing penalties due to delays in completing their smelter facilities after the 2023 Audit Report of the Supreme Audit Agency (BPK) highlighted potential non-tax state revenue from administrative fines for smelter construction delays worth US$129 million (Rp2 trillion) that had not yet been collected.
Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia, said that smelter construction should have been completed by 2023. Companies that have not completed their smelter construction by this deadline are still granted export permits, but under special conditions based on the percentage of smelter construction progress. These companies are typically subject to fines.
The three companies named by the ESDM ministry are PT Dinamika Sejahtera Mandiri, which faces a fine of US$769,000; PT Persada Pratama Cemerlang, fined US$14,900; and PT Sumber Bumi Marau, facing a fine of US$12.3 million.
“The collection process is currently underway,” Bahlil said on Monday, August 26, 2024.
As of March, the Ministry provided updates on the progress of these three smelter projects:
- PT Dinamika Sejahtera Mandiri in Sanggau, West Kalimantan: The bauxite smelter project has reached 58.55 percent completion. The facility has a processing capacity of 5.2 million tons per year, aiming to produce 2 million tons of smelter-grade alumina (SGA) annually. The project is facing challenges in securing investors for funding.
- PT Persada Pratama Cemerlang in Sanggau, West Kalimantan: This bauxite smelter is 52.62 percent complete, with a processing capacity of 2.52 million tons per year, targeting 1 million tons of SGA annually. Similar to the first project, it is also experiencing difficulties in attracting investors.
- PT Sumber Bumi Marau in Ketapang, West Kalimantan: With a progress rate of 50.05 percent, this bauxite smelter has a processing capacity of 2.6 million tons per year and aims to produce 1 million tons of SGA annually. Like the other two, it is also facing investor-related challenges.
These smelter projects are part of a larger initiative involving 16 integrated smelters across different commodities: seven nickel smelters with a total investment of US$2.68 billion, seven bauxite smelters requiring US$5.85 billion, one iron smelter costing US$51.5 million, and one copper smelter with a budget of US$3.08 billion.
PTFI and Amman not subject to fines
The ESDM ministry also named two other companies, PT Freeport Indonesia (PTFI) and PT Amman Mineral Nusa Tenggara (AMNT), that could have faced fines amounting to US$56.7 million and US$59.6 million, respectively.
However, these companies avoided fines by accelerating their smelter construction projects, despite initially missing the original target deadlines.
“We saw good faith in these companies. Although they were initially hesitant to speed up construction, fortunately, PTFI has now completed its commercial operation date (COD),” Bahlil said.
PTFI’s copper smelter officially began operations in June, and its production is expected to start in the fourth week of August.
“Their smelter has been operational for about 1.5 months. Moving forward, I think there will be no need for fines, or if there are, they will be minimal,” Bahlil said.
Similarly, Amman’s copper smelter has also achieved COD. Both companies have been allowed to operate without penalties due to these developments.
“Once COD is achieved, the smelter is technically complete, but full production capacity may not be reached until December,” Bahlil cited.
Earlier, PTFI announced it would inaugurate the first production of its Gresik copper smelter this week. PTFI President Director Tony Wenas said the inauguration would be led by President Joko “Jokowi” Widodo.
“The Gresik smelter is operational and ready for production. Hopefully, it can be inaugurated by the President next week,” Tony stated on Thursday, August 22, 2024 at the Ministry of Energy and Mineral Resources.
However, the inauguration’s exact date depends on the President’s schedule.
Amman’s smelter
PT Amman Mineral Nusa Tenggara recently completed the commissioning of its copper smelter in West Sumbawa, West Nusa Tenggara (NTB). As of May 31, 2024, this national strategic project has reached 95.5 percent completion and is expected to begin copper cathode production in the fourth quarter of 2024.
AMNT President Director Rachmat Makkasau indicated that the commissioning process for the Amman Smelter would take about five months, starting in early June. This phase includes feeding copper concentrate into the smelter as part of its commissioning.
“The first copper cathode production from the smelter is scheduled for the fourth quarter of 2024,” Rachmat said in a press release, quoted on Monday, July 15, 2024.
AMNT reported that the physical construction and mechanical completion are finished, with only 5 percent of the commissioning work remaining. During this period, various equipment and infrastructure tests will be conducted to ensure all systems function optimally before commencing commercial production.
