Indonesian Mining Giant Seeks to Triple Aluminum Production

Eko Listiyorini

22 Jan 2020, 06:51 PM IST

(Bloomberg) -- PT Indonesia Asahan Aluminium has set a long-term goal of tripling its production capacity by expanding operations to the island of Borneo as it seeks to utilize the region’s abundant bauxite reserves.

The state-owned company known as Inalum plans to boost capacity to 750,000 tons by building a 500,000-ton smelter in North Kalimantan, on the Indonesian side of Borneo, as power supply constraints limit the expansion of its sole facility in Kuala Tanjung, North Sumatra, according to Managing Director Oggy Achmad Kosasih. He didn’t give a timeline.

The existing smelter relies on electricity from a hydro plant that can only provide enough power for 250,000 tons of aluminum a year, Kosasih said in an interview on Monday in Kuala Tanjung. The company is trying to increase output to 300,000 tons by upgrading its furnace, he said.

The expansion by Inalum, which has various holdings in the country’s top miners including a 51% stake in PT Freeport Indonesia -- the company that runs the giant Grasberg copper and gold mine -- is in keeping with President Joko Widodo’s goal of shifting the country from an exporter of minerals into a major producer of processed metals. The move will also help cut raw material costs as Kalimantan is Indonesia’s top bauxite producing region.

“Increasing production capacity won’t mean anything if we don’t cut costs from the production side and the source of raw materials,” Kosasih said.

Alumina Refinery

The company and its unit PT Aneka Tambang, or Antam, are also building a 1-million ton refinery in Kalimantan to process bauxite into alumina in order to reduce imports. The refinery, which aims to start production in early 2022, will eventually be able to produce 2 million tons of the feedstock for aluminum, he said.

Inalum, which also owns majority stakes in coal miner PT Bukit Asam and tin miner PT Timah, said in July it had earmarked as much as $10 billion over the next five years to develop refineries and smelters.

Aluminum futures fell 0.1% to $1,822 a ton on the London Metal Exchange on Wednesday. Shares of Antam rose as much as 1.3% on the Indonesia Stock Exchange, while Bukit Asam dropped 2.7% and Timah fell 2.4%.

Other remarks from the interview
Inalum sees aluminum prices staying around $1,800 a ton this year as supply and demand balance, President Director Orias Petrus Moedak said in the interview. Inalum expects to start getting dividends from Freeport Indonesia next year as the venture fully shifts operations to underground mining, Moedak said. Freeport is on schedule to complete 1,000 kilometers of underground tunnels at Grasberg this year, Moedak said. Open pit mining will cease in the middle of this year as ore deposits run out.

Other remarks from the interview

Inalum sees aluminum prices staying around $1,800 a ton this year as supply and demand balance, President Director Orias Petrus Moedak said in the interview.
Inalum expects to start getting dividends from Freeport Indonesia next year as the venture fully shifts operations to underground mining, Moedak said.
Freeport is on schedule to complete 1,000 kilometers of underground tunnels at Grasberg this year, Moedak said. Open pit mining will cease in the middle of this year as ore deposits run out.

--With assistance from Yoga Rusmana.

To contact the reporter on this story: Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, ;Thomas Kutty Abraham at tabraham4@bloomberg.net, Jason Rogers, Keith Gosman