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Construction of a Smelter in Papua Becomes a Condition for Freeport’s Contract Extension

Ilustrasi. (Foto: PT Freeport Indonesia/PTFI)

The construction of a copper smelter in Papua is one of the requirements for extending PT Freeport Indonesia’s operations. Meanwhile, the amount of Grasberg mine reserves determines the period for extending operations. The Freeport concession period ends in 2041.

Minister of Investment Bahlil Lahadalia said that discussions regarding the extension of Freeport’s operations had entered the final stage of negotiations. It’s just that he did not explain when the deadline for these negotiations. He only emphasized that there were conditions that Freeport had to fulfill in order to obtain an extension of operations.

“By extending [the operation], we ask for a smelter in Papua. This concerns the sovereignty and dignity of the Papuan people,” Bahlil said at a press conference in Jakarta, Friday (30/6).

Bahlil has not specified the location of the smelter. According to him, the determination of the smelter location depends on the results of the feasibility study (FS). “Where the location is depends on FS. It can be in Timika, Fakfak, it can be anywhere. But this is still a calculation,” he said.

Meanwhile, the Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif previously said that the volume of mineral reserves in the Grasberg underground mine will determine the period for extending Freeport Indonesia’s operations after 2041. Freeport must conduct exploration to ensure the availability of reserves. Referring to Article 47 of the Mineral and Coal Mining Law, the operating period for metal mineral mining that is integrated with the smelter is 30 years and is guaranteed to get an extension for 10 years each time after fulfilling the requirements in accordance with statutory provisions.

Freeport is included in the category of integrated industry as referred to in Article 47 of the Minerba Law. Freeport has a mine in Grasberg, Papua and a smelter in Gresik, East Java. Referring to Article 47, it is projected that Freeport will receive an extension of the operating license after 2041 for 30 years or until 2071. However, Arifin emphasized that the period for the extension of operations is determined by the level of existing mineral reserves.

“For that [the extension of operations] we have to make sure there are no reserves. To ensure that they have to do exploration, this will be done. “Later on the results of exploration it will be discovered that the number of reserves is sufficient for how many years, and it is hoped that at that time the Indonesian partner will be able to play a more role,” said Arifin.

It’s just that Arifin did not explain when the extension of the operation would be granted. Given that Freeport’s operating period ends in 2041. Arifin only explained that the government is currently preparing a set of regulations that guarantee investment for the integrated mining industry. “It’s still 2023. There are still 18 years from 2041. But we have prepared the equipment. with the record that there is evidence, back up,” he explained.

He said that the existing government regulations contain clauses for extending operations to be submitted no sooner than five years or no later than one year before the contract expires. He explained that the latest PP draft provides earlier business certainty. It’s just that Arifin could not explain the timeframe for the company to apply for the extension. “We have to provide business certainty. That way they can allocate a budget for additional exploration,” he said.

Arifin further explained that the exploration results determine whether there is an increase in Freeport’s production. He emphasized that if there is an increase in production, the concentrate produced must be absorbed by the new smelter. This is because currently the production of 3 million tons of concentrate has been absorbed at the Gresik smelter, East Java. “So if there is an addition, it means that it has to be processed. They have to build a smelter, Freeport has agreed. Now an exploration has to be carried out to ensure the ore reserves,” he explained.

In a hearing with Commission VII of the House of Representatives (DPR) in mid-February 2023, MIND ID Main Director Hendi Prio Santoso revealed a request for an extension of Freeport’s operating permit after 2041. MIND ID is the majority shareholder of Freeport Indonesia.

“This is beyond or after 2041, so that we can maintain the rate of mining progress that applies. We mean, hopefully it can be achieved earlier, because we are afraid that the rate of progress will decrease towards the end of 2041 if there is no certainty that after 2041 IUPK The question is whether to continue,” he said at the time.

President Director of Freeport Indonesia Tony Wenas once stated that the total reserves of copper ore reserves in 2019 reached 1.8 billion tons. Assuming that ore production is around 150 thousand tons per day, mining activities can last until 2051. The current reserves are in Block A and Block B around the Grasberg mining area. In fact, there are still many potential reserves at several points in Papua. This potential, said Tony, can be managed in the long term.

“We do have reserves. If we do the math, we can get tens of years. If there are more resources that can be used as reserves, we can add more. But basically, the reserves and resources that are there are more than 2041,” he said.

Image source >>> PT Freeport Indonesia/PTFI

Source >>> https://investor.id/business/333719/pembangunan-smelter-di-papua-jadi-syarat-perpanjangan-kontrak-freeport