Jakarta – The government has dropped its demand that Freeport-McMoran Inc build a $1.5 billion copper smelter in Papua province, saying a regionally owned enterprise would take on the project instead, news website Detik.com reported, quoting the mining minister.
The ministry in December said Arizona-based Freeport, which runs the world's fifth-largest copper mine in Indonesia, should agree to build the Papua smelter in five years if it wanted a mining contract extension beyond 2021.
The latest decision could ease pressure on Freeport, which has already agreed to a $2.3-billion expansion by 2017 of its copper smelting facility in East Java, currently the only one in the country.
The government has been pushing the company to comply with rules that force miners to process and refine minerals domestically.
"If Freeport is burdened in two locations it would be uneconomical," Energy and Mineral Resources Minister Sudirman Said said on Sunday, according to the Detik report.
A regionally owned enterprise would build the Papua smelter and could team up with other investors on the project, the ministry said in a document obtained by Reuters.
An investor from China has already approached the Papua administration, Detik's report cited Sudirman as saying, without providing details. "A smelter on its own is not economical so we are building an [industrial] zone to make it more attractive," the minister said.
A ministry spokesman was not immediately available to confirm the comments.
The 650-hectare industrial zone in Papua's Mimika area is not far from Freeport's concentrate pipeline and already has a port and electrical infrastructure, according to the document.
The zone will also include a cement packaging plant, a liquefied petroleum gas filling plant, a fertilizer plant and a petrochemicals plant. "This is a win-win solution," Sudirman said, adding that Freeport would be contractually required to supply copper concentrate to the Papua smelter.
"Whoever is tasked to build the smelter in Papua, Freeport Indonesia will form a business-to-business contract with them to supply concentrate," Freeport Indonesia CEO Maroef Sjamsuddin said in the document.
Freeport is expected to produce 2 million tonnes of copper concentrate from its Indonesian operations in 2015, up from 1.4 million tonnes in 2014.
Indonesia aims to develop 4.5 million tonnes of copper concentrate processing capacity nationally, Said said, up from 1.2 million tonnes at present.