By Tito Summa Siahaan on 08:10 pm Aug 19, 2014
http://www.thejakartaglobe.com/business/freeport-sets-gresik-smelter/
Freeport-McMoRan's current contract to operate Grasberg in Papua province expires in 2021.
Jakarta. Freeport Indonesia has picked Gresik, East Java, as the location for its planned copper smelter project to be near infrastructure that would make it easier to ship abroad, instead of being located near its mining site in Papua.
After considering factors like the availability of infrastructure, Gresik was deemed as the more ideal location, said R. Sukhyar, director-general for coal and mineral resources at the Energy and Mineral Resources Ministry. He added that there had been a local request to build the smelter in Papua as part of a move to stimulate development in the province.
“We understand the request by local governments [in Papua]. But they must understand that this smelter project must be done as soon as possible, and infrastructure is readily available in Gresik,” Sukhyar said.
Gresik is already home to a copper smelter that is 25 percent owned by Freeport. Mitsubishi Materials Corporation owns 60.5 percent, while Mitsubishi Corporation Unimetal and Nippon Mining and Metals control the remaining 9.5 percent and 5 percent, respectively.
Sukhyar said that Freeport had received offers on four sites deemed suitable to build the smelter project. “Freeport will pick the best location, based on the issue of cost, efficiency and its relative distance to supporting industries.”
He said that Freeport had already started some of the works on engineering design and is in the process of drafting the environmental impact assessment document.
“We want them to commence construction this year,” he added.
Freeport agreed to invest $2.3 billion for a copper smelter with capacity to produce 400,000 metric tons of copper cathode, as part of a pact between the government and Freeport in the contract renegotiation and easing ore export restrictions.
Freeport had agreed to deposit a $115 million assurance bond to an escrow account while the government had eased its stance on export duty, thus allowing the miner to resume exports of copper concentrates.
The Trade Ministry had granted Freeport a permit to export 1.1 million tons of copper concentrate worth at least $2.3 billion.
Mining companies like Freeport have to build a smelter to comply with the government’s regulation. Indonesia imposed an escalating tax policy, which penalized any company that had not made progress on building a smelter by slapping them with a 25 percent tax on copper concentrate exports or a 20 percent tax on lead, zinc, iron and manganese shipments. The tax was due to increase annually to 60 percent in 2017.