Freeport Suggests Old Smelter Expansion Options
Freeport McMoran, a shareholder of PT Freeport Indonesia (FI), is considering proposing an option to increase the capacity (expansion) of the existing smelter, which is now managed by PT Smelting Indonesia, from 1 million tonnes to around 1.3 million tonnes. . This option is an alternative to the original plan, namely to build a new smelter which is considered uneconomical.
President and Chief Executive Officer (CEO) of Freeport McMoran Richard Adkerson said discussions about the construction of a new smelter with the government are still ongoing. However, his party and the government are also evaluating another alternative, namely the development of the capacity of smelters that are already operating in Gresik, East Java.
"So the alternative is, instead of building a new smelter, it could also expand the existing Gresik Smelter and add precious metal processing facilities," he said in a conference call on the performance of the third quarter of 2020.
According to Adkerson, with the existing capacity expansion, the smelter in Gresik will still not be able to accommodate all of the concentrate produced from the PT Freeport Indonesia mine. Thus, part of the concentrate production still has to be exported, in which case Freeport Indonesia has to pay export duties.
"The benefits that can be obtained are that we can avoid working on this big new project and the financial benefits for the Indonesian government are also very positive," said Adkerson.
With the Covid-19 pandemic hitting the financial conditions of all countries including Indonesia, the additional revenue from export duties is very attractive to the Indonesian Government. However, according to the agreement with the government in 2018, the smelter construction commitment is still held by his party.
"The decision is in the hands of the Indonesian government regarding what PT Freeport will do, but the issue of financial benefits for this government is very significant," he said.
Executive Vice President & Chief Financial Officer of Freeport McMoran, Kathleen Quirk, added that the investment required for a smelter would be greatly reduced if only expansion was carried out from the existing smelter. To build a new smelter, the estimated investment is the US $ 3 billion.
"And the estimated investment for smelter capacity expansion in Gresik is 30 percent, which is around the US $ 250 million and the estimated investment is the same for precious metal processing facilities," said Quirk.
The concentrate smelter currently operated by Smelting Gresik has a capacity of 1 million tons of copper concentrate. If a 30 percent expansion of this facility is carried out, the capacity will only increase by 300 thousand tons of copper concentrate. Meanwhile, for the construction of a new smelter, it is planned to have a capacity of up to 2 million tons of copper concentrate. Regarding the plan to build a new smelter, Adkerson continued, it is still in the discussion stage with the government.
Led by MIND ID who is also a shareholder of PTFI, Freeport Indonesia asked to postpone construction completion for 12 months. This is after the Covid-19 pandemic which has an impact on the mobility of international contractors and local workers.
"The government is still in the stage of evaluating these alternatives, apart from building a new smelter. No decision has been reached yet, "he said.
Initially, Freeport Indonesia committed to complete this smelter by December 21, 2023. This is in accordance with the time limit for allowing unrefined mineral exports, which is until 2023. This time limit is regulated in Law Number 3 of 2020 concerning minerals and coal. The new Freeport smelter is planned to be located in the Java Integrated Industrial and Port Estate (JIIPE) industrial area in Gresik, East Java.
Investor Daily, Page-10, Friday, Oct 30, 2020
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