Gold and copper mining giant PT Freeport Indonesia (PTFI) has entered a five-year, US$1 billion, unsecured credit facility to develop two metal smelters in Gresik, East Java, as the country moves forward with plans to develop downstream mining industries.
PTFI shareholder Freeport-McMoRan wrote in a statement on July 22 that the funds would be used to expand an existing copper smelter and build a new one in Gresik. The former project would cost an estimated $250 million and the latter, to be developed by Japan-controlled PT Chiyoda International Indonesia, an estimated $2.8 billion.
The funds would also go toward developing a gold and silver refinery connected to the two smelters and estimated to cost another $250 million.
“Construction of the new smelter capacity would result in the elimination of export duties, providing an offset to the economic cost associated with the smelter development,” wrote the publicly-listed Arizona-based Freeport-McMoRan in the statement.
PTFI is expected to develop the metal smelters as one of many conditions agreed to by Freeport-McMoRan for extending the permit for the Grasberg mine in Papua, which is one of the world’s largest gold and copper mines. Freeport-McMoRan also had to reduce its ownership in PTFI to 49 percent in a divestment that gave state-owned mining holding company MIND ID a controlling stake.
The Indonesian government expects four smelters in total, including PTFI’s two smelters, to be completed by 2023 as part of a bigger plan to industrialize the economy. While Freeport McMoran expects the expansion to be completed by 2023, it only expects the new smelter to be completed by 2024.
Energy and Mineral Resources Ministry Mining Director General Ridwan Djamaluddin confirmed that PTFI would receive the export duty incentive.