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Freeport should build two new Indonesia copper smelters by 2020 -govt

By Wilda Asmarini

JAKARTA, Dec 23 (Reuters) - Freeport-McMoRan Inc needs to build two Indonesian copper smelters at a cost of around $4 billion by 2020, a government official said, as talks resumed between the miner and Jakarta over the firm's future in the Southeast Asian country.

The proposal comes five months after Freeport signed a memorandum of understanding (MOU) with the Indonesian government that ended a six-month tax dispute and paved the way for the company to resume copper concentrate exports.

As part of July's MOU, the country's largest copper producer agreed to pay a $115 million "assurance bond" to develop a $2.3 billion smelter by 2017. The government is now asking Freeport to build a second one by 2020 at a cost of around $1.5 billion.

"We have asked Freeport to build another smelter in Papua that is different than the one in Gresik," Coal and Minerals Director General Sukhyar told reporters on Tuesday.

Freeport Indonesia's chief executive officer, Rozik Soetjipto, declined to comment on the Papua smelter proposal as negotiations were still ongoing.

Freeport is working with fellow U.S. miner Newmont Mining Corp on the building of the first smelter. A location for the facility, expected to annually process 1.6 million tonnes of copper concentrate into copper cathode, has yet to be finalised.

The Papua smelter is expected to process at least 600,000 tonnes of copper concentrate per year, Sukhyar said.

"This (second smelter) is aimed at processing more of Freeport's production of (copper) concentrates after the development of underground mining," he said.

Freeport wants assurances its contract will be extended beyond 2021 before agreeing to invest more than $15 billion to turn its Grasberg complex into an underground mine after 2016.

But government officials say formal talks on renewing the contract cannot under law commence until 2019. The July MOU was seen as a way to bridge that gap and offer the assurances Freeport needs to invest in underground mining.

(Writing by Randy Fabi; Editing by Himani Sarkar)