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Freeport Indonesia aims for August kick-off of construction on new copper smelter

[JAKARTA] Freeport Indonesia, operator of Grasberg, the world's second-biggest copper mine, expects to start construction of a new smelter in August, its chief executive said on Wednesday.

Front-end engineering and design for the US$3 billion smelter has been concluded and ground preparation is expected to finish in around three months, said Tony Wenas, chief executive of PT Freeport Indonesia, a unit of Freeport-McMoran Inc.

Construction of a smelter is part of Freeport-McMoran's deal with the Indonesian government to maintain its mining rights at Grasberg until 2041, and the US company has said it is committed to building one by Dec 21, 2023.

"Ground preparation will be finished soon, maybe in two to three months, and it will be followed immediately by physical construction," Mr Wenas told a parliamentary committee.

The smelter, to be located in East Java, is expected to consume two million tonnes of copper concentrate a year and produce between 500,000 tonnes to 600,000 tonnes of copper cathodes annually, he said.

The new plant will add to its existing smelting output of 300,000 tonnes of cathodes a year.

Mr Wenas said the company is in talks with nine banks to secure US$2.8 billion in loans to help finance the construction.

Meanwhile, the company has started to transition to underground mining at Grasberg in Indonesia's Papua province, which is expected to affect its copper output.

Output from the mine in 2020 is expected at around 50 per cent of its "normal level" at around 210,000 tonnes of ore per day, with output to return to normal in 2022.

Freeport Indonesia expects to produce more than one million tonnes of copper concentrate this year, spokesman Riza Pratama said. 

REUTERS