Indonesia now controls 51.23% Freeport shares

Freeport Divestment Signing – Indonesian Ministers and CEO of Freeport stand for photo session after the signing of Freeport shares to Inalum (Photo credit: ESDM)

JAKARTA (RambuEnergy) – The state-owned company PT Indonesia Asahan Aluminium (Persero) or PT Inalum has on Thursday (27 Sep) signed deal to acquire stakes owned by Rio Tinto in PT Freeport Indonesia, raising its stake in the company to 51.23% from 9.36% at present.

The transaction costs US$3.85 billion or equals to Rp56 trillion and is expected to be completed by the end of 2018.

The agreement was signed by PT Inalum, Freeport McMoRan Inc and Rio Tinto.

The deal was a follow of the Head of Agreement between the parties signed earlier. The agreements comprise of Divestment of PTFI, sales and purchase agreement (SPA) with PT Rio Tinto Indonesia (PTRTI) and agreement of PTFI Shareholders.

The agreement was signed by President Director of Inalum Budi G. Sadikin and CEO FCX Ricard Adkerson, witnessed by Minister of Energy and Mineral Resources Ignasius Jonan, State Enterprise Minister Rini Soemarno, Finance Minister Sri Mulyani Indrawati and Environment and Forestry Minister Siti Nurbaya.

Minister Jonan said with the signing of the deal, the government will issue a Special Mining Permit (IUPK) that will extend Freeport’s operation to a maximum of 2041.

As part of the deal, Freeport is required to develop smelter plant with the capacity of 2-2.6 million tons per annum within the next five years.

IUPK is a government commitment to maintain the investment climate in the country, Jonan said.

Rini added Papua local governments will own 10% shares in PTFI and should get more benefits from the mining operation.

Rio Tinto
In a statement, Rio Tinto said that Inalum has also signed a binding agreement with Freeport McMoRan Inc. (FCX) in relation to the future ownership and operation of the Grasberg mine.

“This agreement is a significant step towards the sale of our interest in Grasberg and provides further evidence of our commitment to strengthening the portfolio by selling non-core assets and driving higher returns across the business,” Rio Tinto chief executive J-S Jacques said.

“We will continue to shape the portfolio, maintain a strong balance sheet and allocate capital to the highest value opportunities in order to ensure that Rio Tinto continues to deliver sector-leading returns to shareholders,” he added.

The transaction and the Inalum/FCX transaction (which are inter-conditional) are each subject to a number of conditions precedent being satisfied, including the receipt of regulatory approvals. Subject to these conditions being met, completion of both transactions is expected to occur in the first half of 2019, said Rio Tinto

The proceeds of the sale are to be paid in cash to Rio Tinto at closing, with the funds to be used for general corporate purposes.

Grasberg Mine
The Grasberg mine in Indonesia is currently owned by FCX, who hold a 90.64 per cent interest, and the Government of Indonesia, who own the remaining 9.36 per cent.

In line with a participation agreement signed on 11 October 1996, Rio Tinto currently has a right to 40 per cent of production above a pre-agreed level and 40 per cent of all production after 2022.

In 2017 the Grasberg mine produced 468kt and Rio Tinto’s share of mined copper was 5.7kt.

As at 31 December 2017, losses attributable to Rio Tinto’s interest in the Grasberg mine in Indonesia were $169 million and the gross assets of the company which holds such interest which is the subject of the transaction were $1,497 million. (*)

Written by Roffie Kurniawan

(Email: roffie.kurniawan@gmail.com, editorial@rambuenergy.com)

 

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