A godsend for Rio Tinto as it looks ready to shed one of its most troublesome assets?
Rio Tinto said yesterday it is in talks that could see it sell its stake in the huge Grasberg copper/gold mine in Indonesia of Freeport-McMoRan for $US3.5 billion (A$4.4 billion).
The sale is linked to moves by Freeport-McMoRan to reach agreement to transfer some of its stake to an Indonesian firm, which has become official government policy.
According to media reports yesterday PT Indonesia Asahan Aluminium, known as Inalum, plans to acquire Rio’s joint venture interest in the operation under a wider arrangement aimed at taking control of Freeport’s local unit PT Freeport Indonesia. It’s the owner and operator of Grasberg which is the world’s second largest copper mine after Escondida in Chile which is controlled by BHP, with Rio a small shareholder.
"Rio Tinto confirms that discussions between Rio Tinto, Inalum and Freeport are ongoing, including as to price," Rio said on Wednesday morning in a statement to the ASX. “No agreement has been reached, and there is no certainty that binding agreements will be signed."
Talks on the future of the Grasberg mine have been going on for more than a year as Freeport and the Indonesian government haggle over terms and conditions. Freeport has sought to agree to terms to cede majority ownership, part of a deal that will allow the producer to keep operating in Indonesia.
The Indonesian government has given foreign miners have been given until 2019 to comply with divestment obligations imposed amid a push by President Joko Widodo’s government to exert more local control over the nation’s resources.
Rio has been a partner in Grasberg since the 1990s under an agreement that helped Freeport finance an expansion. It currently holds rights to a 40% share of output above specific levels, and had expected that to shift to 40% of all production from 2023. Because of weak returns Rio has not taken any copper from Grasberg for the past three years.
Rio shares rose 0.2% to $84.76.
