Retno Ayuningtyas, Rangga Prakoso & Kennial Caroline Laia, Jakarta – Freeport Indonesia, a unit of the US mining giant Freeport-McMoRan, has given its full commitment to the government to build a copper smelter in East Java as it prepares to spend $15 billion for the expansion of its mining operations in Papua this year, the company's new chief said on Thursday.
Freeport Indonesia president director Maroef Sjamsuddin admitted that there had been delays in the miner's progress to prove its commitment to government.
"I have pushed the company for these commitments. There are commitments that needed to be made. We made slow progress and I'm angry with my staff, for not speeding up the process," Maroef told journalists at Freeport's offices in Jakarta.
Freeport Indonesia, which operates the Grasberg Mine in Papua – the fifth-largest copper mine in the world and the country's largest gold mine – reportedly was on the brink of losing its export permit after the mining minister said progress on a copper smelter, as required by the government, was not "visible." He accused the company of lacking the will to build the smelter.
Under a memorandum of understanding signed in July, Freeport has a deadline of Jan. 25 to complete the land acquisition for the smelter that has a planned capacity of up to 300,000 metric tons.
Smelter and mining
Maroef, a retired Indonesian Air Force vice air marshal, confirmed Freeport's plan to spend more than $2 billion to build a new copper smelter in cooperation with state-controlled fertilizer firm Petrokimia Gresik in Gresik, East Java.
"Freeport operates in Indonesia, and we will abide by the law and regulations," said Maroef, who was the deputy chief of the Indonesian State Intelligence Agency (BIN) from 2011 to 2014.
The director general of minerals and coal at the ministry R. Sukhyar previously said the requirement for an export permit was that at least 60 percent of the smelter had to be completed.
The facility could take up to three years to build, but the ministry will review the progress every six months. Sukhyar said if Freeport has purchased the land, then the government would consider the progress to be 60 percent. This could secure Freeport's ore export permit for the next six months. The problem was that the government said Freeport had not yet acquired the land, Sukhyar said.
In response, Maroef and Petrokimia Gresik president director Hidayat Nyakman signed the memorandum of understanding on Thursday afternoon, which would see the miner leasing Petrokimia's land for the smelter location. Hidayat said the US-based company had been eying the location for the past two years.
"It all has been a thorough process, and it doesn't happen quickly. In the past three months, Freeport's teams from the US and consultants came to look for the location," he said.
The agreement apparently took time because the land Freeport sought was not for sale. Hidayat explained that Freeport wanted 60 hectares of land belonging to Petrokimia, who was not willing to sell it. "So the agreement is that they lease the land, because we won't sell," Hidayat said.
Freeport already owns a 25 percent stake in Smelting, the only copper smelting and refining plant in operation in Indonesia. It can produce 300,000 metric tons of copper cathode annually. Only 40 percent of the miner's copper concentrate is currently being processed at Smelting's facility, but the government said it was not enough to comply with the regulations.
In January last year, Indonesia banned the exports of raw minerals and imposed export duties for some processed minerals, including copper concentrate in an effort to push miners to add value to their minerals inside the country.
Beside the $2 billion smelter investment, Freeport's Maroef said the mining giant also plans to spend $15 billion to develop its underground mine at Grasberg.
Maroef didn't give much details on the Papua mine expansion, but the company's previous chief, Rozik B. Soetjipto, had said Freeport was planning to invest between $16 billion and $18 billion to make a major shift from open pit to underground mining at Grasberg. Freeport signed its first contract for Grasberg in 1967.
From soldier to mining company boss
Maroef, who was appointed as Freeport president director on Jan. 7 and formally took over the post on Jan. 16, said he had never imagined to work for Freeport.
"My goal was always to be a good and professional soldier until the end, so that I could retire with a good assessment," said Maroef, who is the younger brother of retired Army general Sjafrie Samsoeddin.
Maroef said he realized that he did not have the right background to take the helm of the company but that he got the offer from Freeport-McMoRan president director James Moffett. "He said I don't care about your background, I need you," Maroef said, quoting Moffett, who also served in the military.
His first encounter with the chairman dates back to 2011 when there was a major strike at Freeport. As the deputy chief of BIN, Maroef negotiated with the employees and management to find solutions, which later ended the strike.
Maroef said a raw ore export ban would not only affect the company's business. Just like during the strike, it would also impact society. He claims that Freeport supports the livelihood of the local people.
"If there's an operational shutdown, how do they earn a living for their families? Don't only look at the figures. Also look at the social costs," he said.
The Freeport operation in Papua has been colored with many security and safety concerns, from police killings, shootings, worker protests to fatal accidents.
"Papua has a long story of disparity and injustice about the way the company has treated the indigenous people. While it has slightly improved the welfare of the people of Papua, it has been mining Papua's natural resources since the New Order era," said Hendardi, chairman of the Setara Institute for Democracy and Peace.
Hendardi said the government and companies should cooperate in designing a policy to address poverty in Papua, adding that it's been one of the main issues often leading to unrest in the province.
"The policy regarding the activities of foreign companies in Papua has to be more humane. It should take the side of the area's indigenous people. The government and its officers have to treat the Papuans better," Hendardi said.
"Unfortunately, the government and even its officers have always interpreted protest in the province as a separatist movement, whereas their only desire was to find justice," Hendardi said.
[BeritaSatu, Investor Daily & Jakarta Globe.]