GRASBERG DEAL IN SIGHT

Indonesia, Freeport-McMoran may ink majority ownership agreement over weekend

JAKARTA

INDONESIA and FreeportMcMoRan Inc may sign a new agreement as soon as this weekend that will lay out a road-map for the transfer of majority ownership of the giant Grasberg copper and gold mine to a local firm, according to people familiar with the proposal.

The nation’s government, state-owned PT Indonesia Asahan Aluminium (Inalum) and Phoenix-based Freeport were set to back a so-called transaction completion agreement as early as tomorrow, said the people.

Under the new deal, Inalum would seek to acquire Londonbased Rio Tinto Group’s joint venture interest in Grasberg by March, and aimed to convert the interest into an equity stake, said two of the people.

Freeport, Indonesia and others would soon sign an agreement that would include a target to finalise the planned transfer of control of Grasberg in the first three months of next year, said the country’s State-Owned Enterprises deputy minister Fajar Harry Sampurno in a text message.

Local ownership of Grasberg will rise to 51 per cent under a framework deal agreed in August that will see the miner divest a majority stake in local unit PT Freeport Indonesia — of which Freeport currently owns 91 per cent. In return, Freeport would be authorised to continue to operate the project through 2041.

That pact also set out plans for investment of as much as US$20 billion (RM81.73 billion) through 2031 to further develop the mine.

The new plan would include a schedule to settle issues on a mining licence and the planned construction of a smelter, according to the people.

A fresh agreement comes amid an easing of tensions between key parties after Freeport in September rejected Indonesia’s proposals on the valuation and planned method of divestment of the miner’s local unit. Since then, talks involving the two sides, and Rio, had shown progress, said State-Owned Enterprises Minister Rini Soemarno last month.

Rio had held direct talks with Inalum about a potential exit from Grasberg, said sources in October.

Under a joint venture arrangement, the world’s No. 2 miner is entitled to cash flows on a 40 per cent share of production above specific levels until about 2021, and on 40 per cent of all production thereafter.