Losing money, Freeport continues to build a smelter
PT Freeport Indonesia (PTFI) has stated that it is still committed to continuing the construction of a copper smelter in Gresik, East Java, even though the project is considered no longer economical.
PTFI President Director Tony Wenas said that the construction of a copper smelter project in Gresik, East Java has the potential to cost the company up to the US $ 10 billion or around Rp 145 trillion (assuming an exchange rate of Rp14,500).
According to him, the loss was due to the income and treatment charge and refining charge (TCRC) that were not in accordance with the project's economics. For approximately 20 years the cost of a fully controlled international market-controlled TCRC for copper concentrate has been in the range of US $ 20-US $24 cents. Per pound, even down to US $18 cents per pound in March 2020.
"It's a loss if you say profit is misleading. If we build a new copper smelter, it will cost the US $3 billion with such a capacity. For that, the TCRC has to reach US $60 cents, "said Tony.
He compared it with smelters in other places which were quite US $20 cents.
"So there are a spread of US $40 cents which is borne by PTFI and that is the US $300 million per year. If in 20 years it is US $6 billion-plus the construction of a smelter of US $3 billion, it will be almost US $10 billion, "he said.
According to Tony, the one who suffered the most losses due to the burden of the refining project was PTFI and another PTFI shareholder, namely Inalum. However, PTFI remains committed to continuing the construction of the smelter project in accordance with the provisions of PTFI's Special Mining Business License (IUPK).
As of July 2020, the realization of PTFI copper cathode smelter construction has only reached 5.86 percent. The realization is under planning whose construction should have reached 10.5% by July 2020.
Meanwhile, the construction of the precious metal refinery (PMR) facility, which is integrated with a copper cathode smelter, has also shown slow progress. Until July 2020, from the work plan target of 14.29%, the realization still reached 9.79%.
As for July 2020, PTFI has poured investment funds for the smelter construction of up to the US $290 million. Capital costs are budgeted to reach the US $ 3 billion.
Previously, members of Commission VII of the Indonesian House of Representatives, Rofik Hananto, criticized Tony Wenas' statement that the copper smelter project was not profitable. According to him, the project will provide added value that will benefit Indonesia and can open up new jobs.
"PTFI's discourse for the smelter project to lose money is not right. This is very profitable for the nation, there is added value, creating jobs. That is a tremendous benefit for the nation and state, ”he said in a hearing on Thursday (27 August).
Bisnis Indonesia, Page-4, Friday, Sept 4, 2020
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