Rio Tinto Group is ready to accept a $3.5 billion deal with Indonesia for its interest in the giant Grasberg copper and gold mine, according to people with knowledge of the discussions.
A deal for Rio’s exit still depends on Freeport-McMoRan Inc.striking an agreement to transfer some of its stake to a local firm, according to the people, who asked not be identified because the matter is confidential. No deal has been signed and an agreement may still not be reached. Shares in Freeport jumped on the news, while Rio pared a loss in New York.
State-owned 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, said the people. PT Freeport Indonesia is the owner and operator of Grasberg, the world’s No. 2 copper mine.
“Discussions between Rio Tinto, Inalum and Freeport are ongoing, including as to price,” Rio said Wednesday in a statement. “No agreement has been reached, and there is no certainty that binding agreements will be signed.”
Inalum declined to comment, while a spokesman for Freeport didn’t respond to a request for comment. Riza Pratama, a spokesman for PT-FI, said the company hopes to conclude negotiations by the end of June.
Talks on the future of Grasberg have dragged on for more than a year as Freeport has sought to agree to terms to cede majority ownership, part of a deal that will allow the producer to keep operating in the country. 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, the world’s No. 2 miner, has been a partner in Grasberg since the 1990s under an agreement that helped Freeport finance an expansion. The London-based producer currently holds rights to a 40 percent share of output above specific levels, and had expected that to shift to 40 percent of all production from 2023, according to an April filing.
A tide of resource nationalism is causing miners to rethink where they invest, Rio Chief Executive Officer Jean-Sebastien Jacques said in a May 15 speech in Miami. The producer has flagged a strategy to continue to exit from unwanted operations, after agreeing to $5 billion worth of asset sales this year.
Freeport shares jumped as much as 6.5 percent on Tuesday before closing up 2.9 percent. Rio’s New York shares closed down 0.3 percent, recovering from a 0.7 percent decline earlier in the day.