Indonesia drops demand on Freeport-McMoran to construct $1.5bn copper smelter in Papua

15 February 2015 (Last Updated February 15th, 2015 18:30)

Indonesia's Government has lifted its previously announced demand that Freeport-McMoran, a US-based natural resource company needs to construct a $1.5bn copper smelter in Papua province.

Indonesia's Government has lifted its previously announced demand that Freeport-McMoran, a US-based natural resource company needs to construct a $1.5bn copper smelter in Papua province.

Reuters quoted website Detik.com as saying that the project would be taken up by a regionally owned company by partnering with other investors instead.

In December, the ministry said that Freeport-McMoRan has to construct two Indonesian copper smelters worth $4bn by 2020.

"Whoever is tasked to build the smelter in Papua, Freeport Indonesia will form a business-to-business contract with them to supply concentrate."

It was demanded that if the company, which runs a copper mine in Indonesia, wants a mining contract extension beyond 2021, it should agree to build the Papua smelter within five years.

The government's latest decision is expected to reduce pressure on the company.

Freeport-McMoRan has already agreed to an expansion of its copper smelting facility in East Java by 2017, which will involve an investment of $2.3bn.

According to the Detik website, Energy and Mineral Resources Minister Sudirman Said was quoted as saying: "If Freeport is burdened in two locations it would be uneconomical."

Said to be not far from Freeport's concentrate pipeline, the 650ha industrial zone in Mimika area in Papua already has a port as well as eletrical infrastructure, according to a document obtained by the news agency.

The agency quoted Freeport Indonesia CEO Maroef Sjamsuddin saying in the document: "Whoever is tasked to build the smelter in Papua, Freeport Indonesia will form a business-to-business contract with them to supply concentrate."

In 2015, the company is expected to produce two million tonnes of copper concentrate from its Indonesian operations.