Jakarta, CNBC Indonesia – Freeport McMoran President and Chief Executive Officer (CEO) Richard Adkerson suggested that PT Freeport Indonesia not build a new smelter, after some time ago proposing to postpone the operation of the new smelter to 2024 due to the project being delayed due to the Covid-19 pandemic.
Adkerson said, in exchange, his party proposed another option that could be considered, namely expanding the existing smelter in Gresik which is operated by PT Smelting by adding a precious metal factory in it.
“So, as an alternative instead of building a new smelter, we provide options on how to expand the existing Gresik smelter and add a precious metal factory,” said Adkerson. conference call about Freeport McMoran’s third quarter performance on Thursday last week (22/10/2020).
However, he admitted that if it only expanded the existing smelter, it would likely not be able to absorb all of Freeport’s concentrate production going forward, especially after the underground mine was fully operational. Therefore, according to him, there needs to be an agreement so that Freeport can export its excess.
“Therefore, there must be an agreement that allows us to export the excess. And we will propose it if allowed,” he said.
As is well known, the MIND ID Mining BUMN Holding is now the majority shareholder in PT Freeport Indonesia (PTFI). Richard said this was being discussed with the Ministry of BUMN and also related ministries. If this is permitted, Freeport will pay an export fee or duty (export fee) on the exported concentrate.
According to him, the Indonesian government as well as other countries around the world are facing major challenges on the financial side due to the impact of the Covid-19 pandemic.
“The advantage is that we will avoid having to build a construction project from a new smelter and in terms of financial benefits, this will be positive for the government,” he said.
He further said that in the divestment of shares carried out in 2018, the construction of a smelter was Freeport’s commitment. Commitment in building a smelter, according to him, is the result of discussions that have been held for years because it is not economical for everyone.
“But to reach an agreement in 2018, we have to commit to doing it and that commitment is there. So, it really is in the hands of the government about what they will decide, but the issue of financial benefits for the government is a significant issue,” he explained.
Executive Vice President & Chief Financial Officer of Freeport McMoran Kathleen Quirk said the investment needed to expand the Gresik smelter is US $ 250 million or around Rp 3.7 trillion (assuming an exchange rate of Rp 14,700 per US $), much lower than building a new smelter. which is estimated to reach US $ 3 billion or around Rp 44.1 trillion.
“The previous estimate for the new green field smelter was US $ 3 billion. And the estimate for Gresik’s expansion for 30 percent expansion is approximately US $ 250 million,” he explained.
For information, PT Freeport Indonesia is still experiencing problems in the construction of a new smelter project in Gresik, East Java. Freeport Indonesia President Director Tony Wenas said the project was affected by the Covid-19 pandemic where there are large-scale social restrictions (PSBB) in Gresik, including in the Java Integrated Industrial and Port Estate (JIIPE) Industrial area, where the smelter will be built.
Until August 2020, according to Tony, progress construction of a new smelter reached 5.8%.
“The main contractor is also affected by the pandemic, so it is practical that in 4-5 months there will be practically no activity,” Tony said in a virtual discussion on Monday (17/08/2020).
Due to the impact of the Covid-19 pandemic, the company several months ago submitted a request to postpone the operation of the smelter to 2024. This request was submitted to the Ministry of Energy and Mineral Resources (ESDM) as the related technical ministry.
However, ESDM Minister Arifin Tasrif has asked Freeport to immediately complete the new smelter project.
“I hope the PT Freeport smelter project can be completed soon. We will continue to push this because if this is completed, we just have to push the downstream industry so that it can develop,” Arifin said as quoted from the official statement of the Ministry of Energy and Mineral Resources on Tuesday (01/09/2020) .
(wia)
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