Copper mining giant PT Freeport Indonesia aims to complete 7.5 percent of its smelter development in the coming months, although the company has not released details as to when it plans to start construction on the project.
Freeport, a subsidiary of US-based Freeport McMoRan Inc., is planning to build a copper smelter with an estimated total expenditure of US$2.3 billion. The smelter development is part of the company's commitment under a recently inked agreement with the government.
By declaring that it is committed to developing a smelter, the company obtained the government's approval to resume exporting, which was halted on Jan. 12 when the government introduced its mineral ore export ban.
As a sign of its commitment, Freeport has also deposited surety bonds to the value of $115 million, or 5 percent of its total planned spending.
By depositing that amount, the company is seen to have reached 5 percent progress on its smelter, and will only have to pay 7.5 percent in export duty to resume its concentrate exports, according to a regulation on export duties for semi-finished minerals.
The progress of smelter development is determined based on the amount of money spent on its construction.
Under the new regulation, a company whose smelter development progresses to between 7.5 and 30 percent is required to pay 5 percent in export tax on its concentrate exports. If a company's smelter development progresses beyond 30 percent, export duty is removed altogether.
Freeport's president director, Rozik Soetjipto, said the company would spend around $100 million on land acquisition. He did not, however, give a time line for the acquisition of land, nor did he reveal the project's overall schedule.
It is likely that Freeport's smelter will be built in Gresik, East Java, which already has the necessary support infrastructure in place, as opposed to Papua where the company operates.
Freeport's planned smelter will be the second copper smelter in the country, after the one operated by PT Smelting Gresik. Freeport and another copper-mining giant, PT Newmont Nusa Tenggara, which accounts for 97 percent of the total copper concentrate produced in the country, will supply a certain amount of their concentrate to Smelting Gresik. However, due to capacity limitations, most of the concentrate will be sold overseas.
Under the 2009 Mining Law, the government requires mining companies to process their mineral ore into end-product metals. This requirement should have come into effect this year, but the government has allowed committed miners to export semi-finished products, such as concentrate, until 2017, to give them more time to complete construction of their smelters.
Freeport is collaborating with state-owned PT Aneka Tambang (Antam) to conduct a feasibility study for the development of its smelter. Antam president director Tato Miraza said that the smelter's development would only begin next year, adding, therefore, that it was unlikely that the smelter would be completed by 2017.
The building of smelters will be subject to close monitoring by the Energy and Mineral Resources Ministry. The ministry's director general for minerals and coal, R. Sukhyar, said his office would evaluate progress on each smelter's development every six months.
"Every six months, development must reach at least 60 percent of its target. If the target is missed, we will halt the companies' exports," Sukhyar said.
Source: http://www.thejakartapost.com/news/2014/08/08/freeport-sets-minimum-target-smelter-development.html