22 March 2022
The government encourages the mineral and coal mining sector (minerba) to conduct downstream to create added value for the country. By 2024, the government targets as many as 53 processing and refining facilities for mining products or smelters to operate. Some of them consist of four copper smelters, 30 nickel smelters, 11 bauxite smelters, four iron smelters, two manganese smelters, and two lead and zinc smelters.
President Director of PT Freeport Indonesia (PTFI), Tony Wenas said the downstream program was faced with various challenges. The first challenge is the number of mining companies that have not mastered downstreaming. "First of all, if we talk about miners, this is indeed an upstream business, while downstreaming is more downstream," Tony explained in CNBC Indonesia Economic Outlook 2022, on Tuesday, 22nd March 2022.
The next challenge is about funding. According to Tony, building downstream infrastructure requires a large amount of capital. "But the cash flow takes a long time because it hast to invest first, build a smelter, and so on. But it's still more profitable," he said. The funding facility is also a challenge for the downstream program. Tony explained that downstreaming is a capital-intensive industry, which requires incentives from the government. The incentives, he said, could be in the form of fiscal or non-fiscal.
Tony emphasized that if these challenges can be solved, and the downstream program is running, then this can invite many investors. He gave an example that smelter projects have received investors, such as nickel and bauxite smelters in Sulawesi and Kalimantan. "It is the same with the copper smelter which is being built by PTFI, and Amman Mineral is also in the process of building it. And when it has grown into an integrated industry, it will have real added value," Tony concluded.
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