JAKARTA -- The local unit in Indonesia of U.S. mining giant Freeport-McMoRan said on Friday that talks with China's Tsingshan Holding Group about joint development of a major copper smelting plant in the Southeast Asian country have failed.
"[Freeport] could not reach a deal with Tsingshan to build the smelter," Riza Pratama, Freeport Indonesia's vice president for corporate communications, told Nikkei Asia, referring to a project the Chinese company had proposed in North Maluku Province.
Pratama declined to explain what went wrong following months of negotiations overseen by Mind ID, an Indonesian state-owned mining holding company that has the controlling stake in Freeport Indonesia.
Instead, Chiyoda International, a Japanese engineering and construction company with extensive experience in Indonesia, won a contract to design and build the smelting plant in another location -- Gresik on the island of Java, East Java Province -- for an estimated 300 billion yen, or about $2.7 billion.
Mind ID President Orias Petrus Moedak said in May that Tsingshan had approached the government with a "cheaper" proposal that he characterized as "interesting in terms of cash flow." But he also said the Indonesian side needed to check if it would indeed end up costing less.
Reuters reported that Tsingshan had called for building what would have been its first copper smelting plant in Weda Bay on the island of Halmahera in North Maluku, closer to Freeport Indonesia's operations in Grasberg, Papua Province on the island of New Guinea.
The Chinese stainless steel producer is separately building nickel and aluminum smelting plants in Indonesia, and could not immediately be reached for comment.
Freeport on Thursday announced that Chiyoda International won the engineering, procurement and construction contract to build the copper smelter within the Java Integrated Industrial and Ports Estate in Gresik. The Gresik smelter was the original plan before Tsingshan came with its alternative.
The new plant will be able to process 1.7 million tons of copper concentrate annually, adding to the 300,000 ton capacity of Freeport's existing copper smelter nearby. That is operated by Smelting, which is majority owned by Japan's Mitsubishi Materials.
Under the government's push to develop Indonesia's mining industry downstream, Freeport has been obliged to expand its smelting capacity to retain its export licenses.
Moedak had said a decision over the new plant needed to be finalized in May to ensure Freeport was able to meet the government's completion deadline at the end of 2023.
"We will do our best to make sure that the project will be completed on time," Chiyoda International Indonesia director Naoto Tachibana said in a press statement.
Freeport said that while the COVID-19 pandemic contributed to delays in the contract signing, preparations had been proceeding at the Gresik site, including site clearance and procurement of construction materials. The company said it is seeking 40,000 vaccine doses for construction workers to ensure no further delays.
"The contract signing reaffirms [our] commitment to build the smelter, in line with the divestment agreement in 2018," Freeport Indonesia President Tony Wenas said, referring to the acquisition of a majority stake in Freeport's local operations by Mind ID -- or Inalum as it was called at the time -- under the government's resource nationalism push.
Freeport said the contract with Chiyoda includes construction of a precious metals refinery in the same industrial park. Freeport operates one of the world's largest copper and gold mines in Grasberg.
Copper prices hit a record high in May, before falling back in recent weeks. Among the reasons is surging demand from the electric vehicle industry and renewable energy producers around the world. High quality copper is a key component in electric cars as it is used in motors, batteries and cables.