09 January 2023
The global agenda on energy transition is projected to lead to rising demand for the commodity copper. It is believed bright prospects facing this metal minerals will boost the performance of PT Freeport Indonesia (PTFI). In addition to rising demand, copper price is expected to stay strong this year, sending positive signals for state revenue.
In late December 2022, a Bisnis team had occasion to chat with Freeport Indonesia President Director Tony Wenas. On the subject of the prospects for the commodity copper, Freeport says it is prepared for the ban on export of unprocessed minerals, as well as for challenges encountered in production.
What internal challenges is PTFI facing following takeover of a 51 percent stake in the company by the Indonesian government?
I view this instead as a value addition, in that PTFI along with MIND ID as the government’s proxy within the company has grown much stronger with synergy. We work together to accomplish the best for PTFI, such that production remains secure, and sustainability can be achieved.
We are also assisted by better prices that lead to a bottom line of increased contribution for the nation and state, increased profits for the company, and increased revenue for the region. All are seeing significant improvements.
PTFI appears to be sufficiently benefiting from current developments in the price of copper. How does PTFI view prospects for the copper commodity in 2023?
We cannot predict what the price will be next year (in 2023), no one can make this prediction. But what we can see is that 70 percent of the use of copper in the world is for electrical conductivity, and now many businesses or countries are building power plants based on new and renewable energy sources, and this will require copper in much greater quantities compared with fossil energy and coal. Also, electric vehicles similarly require 4 times more copper compared with conventional vehicles.
With such developments currently occurring globally, even if a recession should take place in 2023, in our view demand for copper will remain high. Also, copper stocks are limited, we know there have been no new cooper mines in recent times, and as such we expect demand to remain high going ahead.
Hopefully this will affect the price positively, as China, the huge giant, is showing signs of reviving and in the last few days we have been informed that China is resuming orders for copper, with its industries similarly showing signs of revitalization, and if this state of affairs continues, we expect the price of copper to remain strong.
This is likewise the case with other minerals, it looks like coal will remain strong. As will tin and nickel. This is good news for Indonesia as Indonesia has almost all of these in addition to other natural resources such as CPO (crude palm oil). Their prices are strong and assist our exports, we have experienced a surplus for 30 consecutive months, with the biggest surplus gained just in the previous month. We can see from this current state of affairs that Indonesia has the ability to remain resilient notwithstanding global economic situations, and this is evident as well from our macroeconomic numbers, so it is a mutually supportive setup.
The government is vigorously enforcing its policy on export of unprocessed minerals in order to bolster the downstream industry program. After nickel, export of bauxite ore and other minerals will be halted. How does PTFI view this?
In fact, what the government is undertaking with regard to mineral exports cannot be seen on a case by case basis. What is expected is for an ecosystem for electric vehicles (EV) to transpire. The EV ecosystem will require nickel, alumina from bauxite, will require cobalt, will require copper, along with several other minerals, and these are primary minerals in Indonesia that are to be found in great abundance. Nickel is one of the biggest resources present, copper is another huge resource, as well as tin, and bauxite. So, we are already on the right track for creation of an EV ecosystem.
If this materializes, and I am confident it will, all the efforts we are making together with the government, the private sector, and other stakeholders will come to fruition, and we will become the main destination or the main source for production of the electric battery. Indeed, the expectation is for EVs to be built here. If this comes about, I am confident by 2045 we will be able to achieve a Golden Indonesia. We could well become one of the world’s five biggest economies.
Copper is a vital commodity for such an ecosystem. Currently, what percent of PTFI’s copper production is exported, and what percent is absorbed domestically?
Currently what we are producing is copper concentrate containing copper, gold and silver, and 40 percent of this production is supplied to PT Smelting in Gresik and 60 percent is still exported.
But with progress achieved in the smelter we are currently building, in which project progress for this second smelter was 47.4 percent as of the end of November, we expect 50 percent progress to be achieved by the end of this December. Subsequently, by the end of 2023 physical construction will be completed, with commissioning beginning in 2024. As such by May 2024, we can expect to begin production of copper cathode.
Once this smelter is completed, there will be approximately an additional supply of 600,000 tons of copper cathode in Indonesia, on top of the 300,000 tons already produced at PT Smelting, for a total of 900,000 tons of copper cathode in the country. There will be a further addition from PT Amman Mineral’s copper production, with its smelter expected to be set up by 2024. This will likely bring the total volume to around 300,000 – 400,000 tons of copper cathode. That is a huge quantity. Hopefully, further downstream industries will grow in the country, and what is hoped to transpire is an ecosystem for an EV industry.
What is PTFI’s production target and its forecast for dividend pay-outs in 2023?
In terms of production, we will be carrying out continuous ramp-ups. In 2023 we plan to produce 1.6 billion -1.7 billion pounds of copper and 1.8 million ounces of gold.
Assuming an estimated price of around US$ 4.2 per pound for copper and US$1,800 per ounce for gold, we will be able to contribute around US$ 4 billion to the state in total. This would be an increase from this year’s figure of US$ 3.5 billion. Likewise, Freeport’s profitability will increase, and more importantly, so will dividend for MIND ID or the state.
From 2016 to the present time, we have paid out close to US$ 1 billion or approximately Rp 14 trillion in dividend to MIND ID. Next year, assuming the prices I mentioned before, the total figure could well exceed US$1.5 billion and in 2024, similarly assuming these same prices, the dividend total could amount to US$ 3.9 billion or almost US$ 4 billion, and this figure would suffice to settle the cost of acquiring Freeport in 2018 that was US$ 3.8 billion.
To boot, contribution to regional revenue will increase even more. This year the figure is expected to reach close to US$ 500 million. This what the regional government will receive directly, which is equivalent to approximately Rp 7.5 trillion. Next year the figure could amount to more than Rp 10 trillion, and in 2024 possibly in excess of Rp 12 trillion. This would be outside of CSR. It is part of net profit, of which 6 percent is due to the region, on top of royalty, of which 80 percent is due to the region, and the various regional taxes which in total make up a considerable amount.
What challenges does PTFI anticipate in 2023?
We are a mining company, and natural conditions do not exist in the outer environment alone but are also present in the inner environment. What is meant by the inner environment is the rocks we mine. Some of the rocks might contain moisture; we have identified the types of ore we will be mining, but sometimes there are differentiations. This is one of the challenges we face, and at times the ore turns into sludge. That is why now at Grasberg Block Cave we are conducting remote operations to anticipate flows of wet muck, in which case only equipment would be affected, and they can be cleaned up, but there will be no human casualties. That is our operational challenge, which can be resolved with technology but remains a hindrance.
As the political year approaches, how will PTFI be affected?
Certainly, a political year can have an effect, not just for the company, but even more so for the nation. Yes, 2023 will soon lead to 2024, there will surely emerge much turmoil. But we will continue to focus on what we can control, which is safe and sustainable production.
On the matter of sustainability, Freeport has made a commitment to reduce carbon emission to 30 percent by 2030, and this was also declared during COP26 in Glasgow, and during COP27 in Egypt we reiterated our intention to lower carbon emission to 30 percent.
For instance, where in our previous open-pit mining operation we transported ore with large haul trucks that use fossil fuels, now in Grasberg Block Cave ore is transported using an electric railway with zero emission. In this manner we are able to haul 110,000 tons of ore per day which if converted to use of large haul trucks would be equivalent to 75 trucks using fossil fuels for 24 hours per day, and this is in itself an outstanding reduction of emission.
We are also planning, or in the process building a power plant that will use biofuel. Certainly, in base comparison with a coal-fired steam powerplant, the carbon reduction is significant. In 2027 we will be replacing our steam powerplant with one that uses cleaner energy, gas.
Kami menghimbau para pencari kerja untuk berhati-hati dan mewaspadai beragam modus penipuan perekrutan yang mengatasnamakan PT Freeport Indonesia. Dalam setiap proses rekrutmen dan penerimaan karyawan, PT Freeport Indonesia maupun konsultan rekruitmennya tidak memungut biaya apapun.
Untuk melihat lowongan, silakan akses melalui link berikut: ptfi e-recruitment
Untuk melihat informasi magang, silakan akses melalui link berikut: Internship Program
