PT Smelting Expansion, Freeport Reduces New Smelter Capacity

PT Freeport Indonesia will reduce copper concentrate processing capacity at a new smelter which is planned to be built in the JIIPE integrated industrial area, Gresik, East Java.

Based on the report from Freeport McMoran (FCX), the holder of 48.76% of PT Freeport Indonesia, the concentrate processing capacity at the new copper smelter will be reduced to 1.7 million tonnes of copper concentrate per year from the initial plan of 2 million tonnes of concentrate per year.

This is due to the expansion of capacity in the currently operating smelter which is managed by PT Smelting which is also located in Gresik, East Java.

“PT Smelting’s expansion will reduce PTFI’s new smelter development plan from 2 million tonnes of concentrate per year to 1.7 million tonnes per year,” said a press release from Freeport McMoran regarding its recent 2020 end-of-year report.

Based on company reports, PTFI has spoken with PT Smelting’s majority shareholder, namely Mitsubishi Materials Corporation (MMC), for this expansion project.The increase in capacity at the existing smelters is planned to increase by 30% or around 300 thousand tons of concentrate per year.

Thus, PT Smelting’s copper concentrate processing capacity will increase to 1.3 million tons from the current 1 million tons per year.

“PTFI will continue to evaluate the new smelter project located in East Java in line with discussions with third parties to develop new smelters in other alternative locations,” said FCX in its official statement.

As is known, PTFI has asked the Government of Indonesia to postpone the start of the new smelter in Gresik because it was hampered by the Covid-19 pandemic last year which limited worker mobility and project development plans.

Initially, the new smelter was targeted to operate in 2023, however, due to the pandemic constraints, it is expected to be delayed by a year to 2024.

“PTFI continues to discuss with the Indonesian government to postpone the project schedule, as well as other alternatives due to the impact of the Covid-19 pandemic and the still uncertain global economic conditions,” the report wrote.

Based on the FCX report, PTFI produced 809 million pounds of copper throughout 2020, up 33% compared to 2019 which amounted to 607 million pounds.Meanwhile, copper sales reached 804 million pounds in 2020, up 20.5% from 667 million pounds in 2019. The average selling price of copper in 2020 reached US $ 3.08 per pound, up from US $ 2.72 per pound in 2019.

As for gold, PTFI produced 848 thousand ounces of gold in 2020, down slightly from 2019 which amounted to 863 thousand ounces.Meanwhile, gold sales reached 842 thousand ounces in 2020, down 13.5% from 2019 which reached 973 thousand ounces.The average selling price of gold in 2020 is US $ 1,832 per ounce, up from US $ 1,416 per ounce in 2019.

This was revealed by Minister of Energy and Mineral Resources Arifin Tasrif during a Working Meeting with Commission VII of the Indonesian Parliament, Monday (23/11/2020).Previously, PT Freeport Indonesia and Mitsubishi Materials Corporation (MMC) agreed on a Memorandum of Understanding (MoU) on November 13 to increase the capacity of the copper smelter currently operated by PT Smelting (PTS) in Gresik, East Java.

“The parties agreed to carry out PT Smelting’s expansion on the condition that PTFI provides funding, so that PTFI’s share ownership in PTS increases,” he told Commission VII DPR RI, Monday (23/11/2020).

He said MMC and PTS, by asking PTFI for consideration, would lead the evaluation of the design, contract strategy, development schedule and cost of PTS expansion.This will be confirmed and stated in a definitive agreement.

According to him, the smelter expansion is targeted to operate in December 2023. PT Smelting will continue to refine PTFI’s concentrate in accordance with existing practices using MMC.The high standard of PTS smelter operation is currently stated to be continued based on the guidelines from MMC, including after the completion of PTS expansion.