Gold and copper mining giant PT Freeport Indonesia (PTFI) has signed a US$3 billion contract to develop a copper smelter in Gresik, East Java, ending a year-long uncertainty over the miner’s downstreaming plans.
Freeport Indonesia wrote in a statement on July 15 that it had signed an engineering, procurement and construction (EPC) contract with Japan-controlled PT Chiyoda International Indonesia (PTCII) to develop the smelter in the Java Integrated Industrial and Port Estate (JIIPE) in Gresik, East Java.
The Manyar smelter will produce copper cathodes — one of the key materials used in batteries and electrical wiring — from concentrate supplied by Freeport Indonesia’s Grasberg mine in Papua, one of the largest copper and gold mines in the world. The smelter will have a processing capacity of 1.7 million tons of copper concentrate per year.
“This contract signing shows PTFI’s commitment to develop a smelter in accordance with the 2018 divestment agreement,” said PTFI president director Tony Wenas in the statement.
PTFI is expected to develop a metal smelter as one of many conditions for extending its mining permit for the Grasberg mine. The miner also had to divest shares to the government through state-owned mining holding MIND ID.
The signing of the contract between PTFI and PTCII marks the end of plans between Freeport and China’s Tsingshan Holding Group to build the smelter in Weda Bay, North Maluku, that came to light late last year.
“Freeport did not reach an agreement with Tsingshan to build a smelter,” said PTFI spokesman Riza Pratama as reported by Kontan.co.id.
He added that the Manyar smelter was 7 percent completed as of June. Developers have finished the facility’s engineering design and prepared the land for construction. “This contract signing marks PT Chiyoda International Indonesia’s commitment to contributing toward the Indonesian nation and state. We will do our best to ensure this project is completed on time,” said PTCII director Naoto Tachibana.
The Energy and Mineral Resources Ministry expects the project to be completed by 2023 but PTFI previously said it expected delays due to mobility restrictions amid the pandemic.
“The Energy Ministry is pushing for the acceleration of this project and will continue working with PTFI to ensure this project is completed in time,” said the ministry’s mining director general, Ridwan Djamaluddin, also in the statement.
The demand for batteries is expected to rise as more consumers shift to electric vehicles (EVs) over the next decade, according to a 2017 report by international trade association International Copper Association (ICA).
The report estimates 27 million EVs will be on the road by 2027, up from 3 million in 2017. This will increase copper demand for EV production from 185,000 tons in 2017 to 1.74 million tons in 2027.