A member of Commission VII of the House of Representatives from Hanura Faction, Mukhtar Tompo (left), gives explanation in connection with an incident of a meeting with PT Freeport at the Parliamentary complex, Senayan, Jakarta, Tuesday (14/2). Commission VII of the House asked President Director of PT Freeport Chappy Hakim to openly apologize in connection with the incident after the meeting.
JAKARTA, KOMPAS – Slow smelter construction can happen because of economic factors. Hence the cost of smelter construction should not be borne by mining companies alone but shared with other investors or private businesses.
This was revealed by Harry Poernomo, Gerindra Party member of the House of Representatives’ Commission VII in Jakarta on Tuesday (14/2). “I personally questioned why Freeport seemed to be reluctant to build a smelter [in Papua]. Perhaps, economically it is not worth building. This means that we cannot force them [to build it],” Harry said.
Harry’s remarks were related to the protracted case of PT Freeport Indonesia’s implementation of the domestic downstream industry. To this day, the giant US company that operates in Papua has not been able to export its copper concentrates as it is yet to fulfill several requirements.
According to Harry, the downstream mineral industry had yet to start and obligations for mining companies to build smelters needed to be reviewed. Smelter construction could involve third party or joint-venture companies.
“Are smelters really needed nationwide, such as bridges and other infrastructure? If they are profitable, the government could get involved through cooperation between state-owned companies and mining companies,” Harry said.
At present PT Freeport Indonesia is facing problems exporting copper concentrate. To get an export permit, the company must submit a report on its smelter construction development. The planned smelter, an extension of its smelter in Gresik, East Java, needs investment of US$2.3 billion, equivalent to Rp 29.9 trillion based on an exchange rate of Rp 13,000 per US dollar.
Supply obligation
Similar views were also aired by Budi Santoso, Centre for Indonesian Resources Strategic Studies director. According to Budi, the responsibility for building smelters should not be borne by mining companies alone, non-mining companies could also be involved. “Still, mining companies have the obligation to supply the concentrates to domestic smelters so as to create domestic downstream industries,” Budi said.
For example, copper smelters should be better integrated with manufacturing industries that consumed copper-based raw materials like cables. The side products of copper smelters, such as sulfuric acid, could be utilized by fertilizer factories.
Overwhelmed by problems, PT Freeport Indonesia has decided that its copper concentrate is supplied to PT Smelting in Gresik, a smelter jointly built by a Japanese consortium with an annual capacity of 1 million tons of concentrate.
Freeport has not applied for an export permit due to taxation uncertainty and because its operation extension has not been granted. Prior to this, in addition to supplying PT Smelting, Freeport also exported around 500,000 tons of copper concentrate every six months in line with its export permit.
