Freeport Claims the Smelter Project is Not Profitable
PT Freeport Indonesia opens opportunities for investors who want to work together to build a copper mineral refining facility (smelter). It's just that until now there are no investors who are interested because, from a financial perspective, building a smelter is a loss project. However, Freeport remains committed to building a smelter in Gresik, East Java with an investment of up to US $ 3 billion.
Freeport Indonesia President Director Tony Wenas said there are no more smelters in the world. This is because the income from the smelter business comes from Treatment Charge and Refining Charge (TCRC) worth US $ 20-24 cents per pound. The amount of income has not changed for a period of 20 years. In the conditions of the Covid-19 pandemic, the TCRC smelter was depressed to US $ 18 cents per pound.
"If anyone wants (cooperation) it is fine. The reality is that there is no new copper smelter in the world, ”said Tony.
Tony revealed that the smelter being built currently costs up to the US $ 3 billion. With that calculation, the TCRC should be The US $ 60 cents per pound. Meanwhile, at other smelters, it is the only US $ 20 cents per pound.
This means that there are a difference of US $ 40 cents per pound which is borne by Freeport. If calculated in a year, Freeport's expenses will reach the US $ 300 million and will reach the US $ 6 billion in the next 20 years. So that financially, building a smelter is a loss project.
"Of course PTFI and PTFI shareholders suffer the most losses, in this case, there is MIND ID, also 51%. But our commitment remains that a Special Mining Permit is required to build a new smelter and is now in the process, "he said.
He said the existing Freeport smelter, PT Smelting, is capable of producing 300 thousand tons of copper cathodes per year. Of that amount, about half are exported and the domestic market needs around 150 thousand tons. However, that does not mean that domestic copper consumption is only 150 thousand tons.
Domestic copper needs are still met by other sources. Meanwhile, the smelter currently under construction will have a production capacity of 600 thousand tons of copper cathodes. Under these conditions, all new smelter production will be exported.
"Unless the downstream industry grows rapidly in the next 4 years," he said.
Chairman of the Indonesian Cable Factory Association (Apkabel) Noval Jamalullail previously said that copper smelters in Southeast Asia
only exist in Indonesia, namely PT Smelting. With the construction of two additional smelters by Freeport and PT Amman Mineral Nusa Tenggara, Indonesia's smelter capacity will be even greater. The need for copper in the country and the Southeast Asian market can be met by the three smelters.
"There is no reason not to build a smelter. Indonesia could become the largest country in the copper industry, "he said.
Noval said that the demand for copper for cable factories in the country reaches 450 thousand tons per year. This number can increase
in the next few years after the Covid-19 pandemic ends. This is because cables are needed in infrastructure development, be it the power plant, power grid, offices, and housing sectors.
In addition, he said that copper cathodes can also be processed again into pipes for air conditioning machines, where the demand for 100 thousand tons per year is still imported. Processed copper cathodes can also be used as copper plates, with a requirement of up to 15 thousand tons per year. Other derivative products namely the copper tape intended to wrap copper wires, which was still completely imported.
"This shows that the product diversification needs for copper can increase. If an Indonesian National Standard (SNI) and Domestic Component Level (TKDN) are made, the need for copper can increase again, not 450 thousand tons (cable), ”said Noval.
The Freeport smelter is located in the Java Integrated Industrial and Port Estate (JIIPE) industrial area in Gresik, East Java. This smelter project is designed to be integrated with slime anode purification facilities. The copper smelter from this project is planned to have a capacity of 2 million tons of concentrate, while the slime anode smelter's capacity is 6,000 tons.
Initially, Freeport Indonesia was committed to completing the smelter by December 21, 2023. However, the Covid-19 pandemic hampered development where progress until last July only reached 5.86%. Meanwhile, the target planned should be to reach 10.5% in 6 months.
Freeport has submitted a request for postponement of the smelter construction to the Ministry of Energy and Mineral Resources since last April. The official request includes an adjustment to the smelter target for 12 months or to be completed in 2024. However, until now there has been no official position conveyed by the Ministry. ESDM related to the request.
In early September yesterday, ESDM Minister Arifin Tasrif paid a working visit to the smelter project and asked Freeport to immediately complete its construction.
Investor Daily, Page-10, Monday, Sept 7, 2020
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