Indonesia strikes initial agreement to buy majority stake in Freeport mine

The agreement will give Indonesia control of the Grasberg mine, the world’s second-biggest copper mine, and should cap years of wrangling over the mining rights for the site. — Reuters photo

JAKARTA: Indonesia and Freeport-McMoRan Inc have struck an initial agreement for state-owned mining company PT Inalum to take a controlling stake in Freeport’s local unit, government officials said yesterday, though the final price for the deal remains unclear.

The agreement will give Indonesia control of the Grasberg mine, the world’s second-biggest copper mine, and should cap years of wrangling over the mining rights for the site.

Last August, the two sides agreed to let Freeport keep operating the mine while ceding control.

Indonesian President Joko Widodo said an initial agreement had been reached for Inalum to increase its stake in Freeport’s local unit to 51 per cent from 9.36 per cent.

“I think this is a leap forward. We have to have a larger amount of income from tax, royalties, dividends … so, the value of our mining sector can benefit everybody,” Widodo told reporters.

President Widodo said the state owned enterprises minister and the finance minister would give more details later on Thursday.

Finance Minister Sri Mulyani Indrawati is scheduled to sign a heads of agreement with PT Freeport Indonesia at 4 pm (0900 GMT) on Thursday, a ministry spokesman said earlier.

Freeport chief executive Richard Adkerson is expected to attend the signing, along with Inalum chief executive Budi Gunadi Sadikin and several other ministers.

It was not immediately clear whether a resolution had been reached on how the mine will be managed by Freeport with Indonesia as the majority shareholder.

A Jakarta-based spokesman for Freeport declined to comment.

During Freeport’s five decades of operating Grasberg, located in Indonesia’s easternmost province of Papua, there has been frequent friction between the government and the company over revenue sharing and the mine’s social and environmental impact.

Phoenix, Arizona-based Freeport has been in negotiations with Indonesia to secure long-term operating rights at Grasberg after the government introduced new rules aimed at giving Jakarta greater control over the nation’s resources.

Efforts to finalise a deal have been complicated by concerns over the environmental impact of the project. — Reuters

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