Freeport-McMoRan Inc. and Indonesia signed a binding landmark agreement for the U.S. miner to hand over majority control of the giant Grasberg copper and gold mine to a local state-owned firm, in the country’s biggest ever divestment by a foreign resources company.
Freeport Chief Executive Officer Richard Adkerson and PT Indonesia Asahan Aluminium President Director Budi Gunadi Sadikin signed a divestment deal and two other pacts in Jakarta on Thursday. The transfer of majority shares to Asahan Aluminium will happen once the company makes a payment of $3.85 billion to Rio Tinto Group and Freeport, Sadikin said.
The U.S. producer will continue to operate the mine under the agreement, which culminates more than a year of talks. The accord will allow Indonesia to issue a special mining license for Freeport to run the world’s second-largest copper mine through 2041. Freeport and Asahan Aluminium, known as Inalum, will complete the transaction before the year-end, Sadikin said.
The extension of the mining license, known as an IUPK, is the “government’s commitment to maintaining the investment climate so as to provide certainty and security to foreign investors to invest in Indonesia,” Energy and Mineral Resources Minister Ignasius Jonan said in a statement.
Under the deal, Rio Tinto Group will cash out its economic interest in Grasberg for $3.5 billion, leaving Freeport’s share of the payment at $350 million. Inalum’s stake in the asset rises to 51 percent from just over 9 percent now.
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