Freeport copper smelter project still on track

JAKARTA (JP): Copper and gold producer PT Freeport Indonesia has said development of a US$626 million copper smelter plant in Gresik, East Java, which it partly owns, is running on schedule despite political and economic turmoil.

Freeport's executive vice president and chief financial officer Stephen Jones said Friday trial production at the plant would begin next month, with commercial production scheduled in December.

"The plant is 95 percent complete. They are going to heat up the furnace in August," he said at a media conference.

The country's first copper smelter plant belongs to a joint venture, PT Smelting Co, which is 60.5 percent owned by Japan's Mitsubishi Materials Corporation, 25 percent by Freeport, 9.5 percent by Japan's Mitsubishi Corporation and 5 percent by Nippon Mining and Metals Co. Ltd, also of Japan.

Construction started in 1996.

The plant will need 656,000 tons of copper concentrate, 98,000 tons of silica sand, 52,000 tons of limestone and 23,000 tons of coal per year. All the copper concentrate will be sourced from Freeport's copper mine in Grasberg, Irian Jaya.

Jones said the plant would produce 200,000 tons of copper cathode per year, 60,000 tons of which would be absorbed on the local market and the remainder sold on the export market.

"The plant will turn Indonesia into a net-copper exporter from a net-copper importer at present."

Jones added that the smeltering process would extract gold elements blended in copper concentrate, with the extracts to be sent to an overseas refinery plant for further processing into commercial gold.

Smelting Co. reportedly chose Gresik as the plant's location because state petrochemical company PT Petrokimia, also located in Gresik, will purchase a by-product, sulfuric acid, to make fertilizer. The plant will produce 592,000 tons of sulfuric acid per year.

Jones also said that Freeport expected to produce 240,000 tons of ore a day by the end of the year at its Grasberg mine, up from around 200,000 tons a day currently.

The company received approval in December last year to increase daily output to 300,000 tons from the then average of 127,000 tons, but it lacks facilities at present to reach that level.

"We have environmental approval for 300,000 tons but not the facilities to produce it."

Copper production for the year will be in the region of 1.7 billion pounds, while the mine will produce about 2.7 million ounces of gold, Jones said.

Freeport is 81.28 percent owned by New Orleans-based Freeport McMoRan Copper and Gold, 9.36 percent by the Indonesian government and 9.36 percent by PT Indocopper Investama Corporation.

Indocopper is 49 percent owned by Freeport McMoRan, 50.48 percent by PT Nusamba Mineral Industri, and 0.52 percent by the public. Nusamba Mineral is controlled by Mohammad "Bob" Hasan, a longtime crony of former president Soeharto and Soeharto-led foundations.

Jones added that Freeport was naturally benefiting from the rupiah's slide against the U.S. dollar since its earnings were mainly in dollars and its costs in rupiah.

He noted, however, that the depressed prices of its core commodity sellers -- gold ore and copper -- were hurting earnings.

"The value of our primary commodities has shrunk significantly. While Indonesia undergoes economic difficulties, our business is doing the same," he said. (jsk)