Freeport-McMoRan had to build a new smelter within five years as part of a landmark December 2018 deal, which extended Grasberg's mining licence to 2041 and gave Indonesia a majority stake in PT-FI which owns the giant copper-gold-silver mine.

Freeport (NYSE: FCX) had reportedly been eyeing a smelter deal with China's Tsingshan Steel, which could have seen it off the hook for the new build, however Reuters reported the pair failed to reach agreement in July.

Indonesia president Joko Widodo spoke at the groundbreaking ceremony for PT-FI's new facility at the Java Integrated Industrial and Ports Estate yesterday.

He said the construction of a domestic smelter would strengthen the downstream industry and he hoped Freeport's smelter in the Gresik Special Economic Zone would attract other industries to invest, PT-FI tweeted.

The new smelter would have a 1.7Mt capacity and PT-FI has awarded Chiyoda a construction contract with an estimated cost of $2.8 billion.

In order to meet its commitment of reaching 2 million tonnes of concentrate smelting capacity by December 2023, PT-FI is planning to fund a $250 million, 30% expansion of its PT Smelting joint venture to take its capacity to 300,000t.

The precious metals refinery was expected to cost $250 million.

PT-FI had entered a $1 billion, five-year credit facility to advance the projects, with FCX and PT Inalum planning further debt financing on a 49% and 51% basis respectively, FCX said in July.

Mining has moved from openpit to underground at Grasberg, which is expected to produce about 1.3 billion pounds of copper and 1.3 million ounces of gold this year, nearly double 2020 levels.

US-based Freeport-McMoRan said its economic interest in PT-FI was expected to remain about 81% through 2022 and it remains operator of Grasberg.