Companies Propose $4.09 Billion Worth of New Smelters

Reva Sasistiya, The Jakarta Globe, January 6, 2009 

Several companies have submitted proposals to the government to build five new nickel and copper smelters valued at $4.09 billion this year, just weeks after the House of Representatives passed the mining law on Dec. 16, an official at the Ministry of Energy and Mineral Resources said on Tuesday. 

Simon Felix Sembiring, the ministry’s senior finance and economic adviser, said the new mining law could help investment in the mining sector eclipse the government’s target of $2.1 billion in 2009. 

Construction of some of the newly proposed smelters, however, may not start this year. 

“As one of the world’s biggest producers of mineral resources, we don’t want our raw materials to be exported overseas for processing,” Simon said. The energy ministry said investment in the mining sector reached $1.6 billion in 2008, up from $1.25 billion in 2007. 

Under the new legislation, mining companies with operations in Indonesia are required to process raw materials locally, rather than exporting them to be processed in other countries, as they were permitted to do under the old legislation. 

Companies can choose to either build their own smelters or send materials to existing domestic smelters. 

Soemarno Witoro Soelarno, secretary at the Directorate General for Mineral, Coal and Geothermal Resources at the energy ministry, said the new investment proposals included plans by PT Nusantara Smelting to build a $1.04 billion copper and nickel smelter in Bontang, East Kalimatan Province, and a proposal by PT Gresik Smelting to build a $1.4 billion copper-cathode smelter in Gresik, East Java Province. 

“Investors are now conducting feasibility studies before starting construction,” Witoro said on Tuesday. 

Juangga Mangasi, director of Nusantara Smelting, said in December that the company may postpone the construction of its smelter to 2010, however, due to the credit crunch and the plunge in metals prices in the fourth quarter of 2008. 

State-owned PT Aneka Tambang Tbk is also planning to invest $1.65 billion to build three aluminum and iron-ore smelters in South Kalimantan Province, Tayan, West Kalimantan Province, and Bintan, Riau Islands Province. 

Ten other investors are also considering smelter investments. Anglo-Australian miner Rio Tinto has said it may build a $2 billion nickel smelter in North Sulawesi Province. PT Inco Tbk has revealed plans to construct a $1.1 billion nickel smelter in Sorowako, South Sulawesi Province, and PT Freeport Indonesia has said it will build a $100 million copper smelter in West Papua Province.