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Government Bridges Freeport And Amman Mineral For Smelter Supply Solution
In response to halted production at both Grasberg and Amman's smelter, ESDM Minister Bahlil Lahadalia proposes a domestic supply deal to sustain Freeport Indonesia's processing operations. (Ilyas Fadilah/detikcom)
Jakarta, Indonesia – A unique convergence of challenges in Indonesia's mining sector has prompted a high-level proposal for domestic cooperation. With PT Freeport Indonesia's (PTFI) Grasberg mine inactive and PT Amman Mineral Nusa Tenggara's (AMNT) smelter out of commission, Energy Minister Bahlil Lahadalia is urging the two companies to negotiate a supply agreement. The minister's initiative seeks to utilize Amman's available copper concentrate to feed Freeport's idle smelter in Gresik, providing a stopgap solution for both entities.
The catalyst for this proposal is a pair of unrelated force majeure events. First, a devastating landslide of wet material at Freeport's Grasberg Block Cave (GBC) underground mine on September 8, 2025, forced an immediate and ongoing suspension of operations. This mine is the primary source of ore for Freeport, and its closure abruptly cut off the raw material supply to the company's newly built smelter. Separately, Amman Mineral's copper smelter in West Sumbawa has been in a force majeure (kahar) state since late July 2025 following a fire, preventing it from processing its own concentrate.
Minister Bahlil positioned the government as a facilitator, not a director, of the potential deal. After discussions with Freeport's leadership, he explicitly called for a business-driven dialogue. "I asked for Amman and Freeport to conduct B2B communication so their material can be bought by Freeport to be processed at Freeport's smelter at an economical price. That is a B2B issue," Bahlil stated, reinforcing that the government would not intervene in commercial terms. This stance respects the autonomy of both publicly listed companies while guiding them toward a mutually beneficial discussion.
For Freeport, the operational impact is acute. The GBC mine accounts for about 70% of its production, and the shutdown has reduced overall smelter utilization to just 30-35%. The company's $2.9 billion Manyar smelter, a cornerstone of its downstream expansion in Indonesia, now stands silent. President Director Tony Wenas confirmed the company is assessing various options to secure concentrate, including potential purchases from Amman, but noted that discussions are still preliminary.
Amman Mineral, meanwhile, is operating under a government-granted export relaxation. Due to its smelter's force majeure, the company received a six-month export permit for around 400,000 to 480,000 tons of copper concentrate. While this allows Amman to sell its stockpile on the international market, a domestic sale to Freeport could be more logistically efficient and support national strategic interests. Company leadership has indicated it is "open to selling to anyone" for the right price.
This proposed arrangement aligns with Indonesia's long-term mineral processing goals. By keeping Freeport's smelter operational, the country maintains activity and expertise in high-value downstream refining. Furthermore, it keeps a portion of Amman's mineral wealth within Indonesia for processing, even if temporarily at a different facility, which is consistent with the spirit of the nation's mining laws.
The path forward hinges on commercial negotiations. Key factors will include the quality and composition of Amman's concentrate, transportation logistics from Sumbawa to Gresik, and, crucially, a price that reflects global benchmarks like the London Metal Exchange (LME) while accounting for domestic advantages. Both companies are conducting internal evaluations against the backdrop of their recovery timelines: Amman aims to repair its smelter, while Freeport targets a phased restart at GBC in 2026.
Minister Bahlil's proposal highlights a pragmatic approach to crisis management in the resource sector. By identifying a potential win-win scenario amid two separate disruptions, the government is fostering industry resilience. Whether this leads to a formal contract remains to be seen, but the dialogue itself marks a significant moment of potential collaboration between Indonesia's leading copper producers.
(Hashim Zafran)
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