JAKARTA (Reuters) – Indonesia on Thursday struck an agreement with Freeport-McMoRan Inc and Rio Tinto to buy a controlling stake in the world’s second-biggest copper mine via a series of transactions valued at $3.85 billion.
The heads of agreement establishes a structure for Indonesia, through its state-owned mining holding company PT Inalum, to gain control of the Grasberg mine located in the country’s eastern province of Papua. The deal should cap years of wrangling over the rights for the site as Jakarta seeks to gain greater control over its mineral wealth.
Last August, the two sides agreed to let Freeport (FCX.N) keep operating the mine possibly until 2041 while ceding control over its local unit, PT Freeport Indonesia.
Aside from increasing government revenues, Jakarta hopes the agreement will serve as “a commitment to a conducive investment climate” in Indonesia, Finance Minister Sri Mulyani Indrawati said at a signing ceremony.
Under the agreement, Inalum plans to acquire the Indonesian unit of Rio Tinto (RIO.L)(RIO.AX), which holds a 40 percent participating interest in Grasberg, for $3.5 billion, said Inalum chief executive Budi Gunadi Sadikin.