Inalum completes acquisition of Freeport Indonesia shares for US$3.85B

President Joko Widodo briefs the press on the Freeport shares acquisition (Photo Credit: Special)

JAKARTA (RambuEnergy.com) – After two years of negotiation, Indonesia’s state-owned mining holding company PT Indonesia Asahan Aluminium (Inalum) has finally raised its stakes in PT Freeport Indonesia, the operator of giant Grasberg mine in West Papua, to 51.23% from 9.36% previously. Inalum spent US$3.85 billion to purchase the stakes.

Under the deal, Inalum acquires 40% interest of Rio Tinto in Freeport for US$3.5 billion and the remaining 1.87% from Freeport McMoran for US$350 million.

Prior to the completion of this transaction, the Grasberg mine in Indonesia was owned by Freeport McMoRan Inc., who held a 90.64% interest, and Inalum, which owned the remaining 9.36%.

After the completion of the deal, Freeport McMoRan now holds 48.77% shares in Freeport Indonesia.

In line with a participation agreement signed on Oct. 11, 1996, Rio Tinto held a right to 40% of production above a pre-agreed level and 40% of all production after 2022.

The binding agreement was announced on Sept. 28, 2018 and was subject to a number of conditions precedent, including the receipt of regulatory approvals, which have now been satisfied.

Following the completion of the transaction, Indonesia’s Energy and Mineral Resources Ministry issued a Special Mining Permit for Production (IUPK-OP), replacing the existing Contract of Works (CoW) which will expire in 2021. The CoW was issued in 1967 and renewed in 1991.

The IUPK granted Freeport Indonesia to extend the operation of the Grasberg Mine for another 20 years (2×10 years) until 2041. The IUPK mandates Freeport also to build smelter plant in the next five years.

The energy ministry said of the 51.23% shares, 10% will be allocated to the regional governments of West Papua. Inalum will hold the remaining 41.23%. Shares of West Papua local governments will be held by a special purpose company PT Indonesia Papua Metal and Mineral (IPPM), in which 60% shares are held by Inalum and 40% by BUMD Papua (local government-owned company).

Under the scheme, Inalum will lend the BUMD US$819 million, with 40% shares in IPPM as collateral. The instalment will be paid through the dividend of Freeport Indonesia.

The IUPK was handed over by Director General for Minerals and Coal Bambang Gatot Ariyono to President Director of Freeport Indonesia Tony Wenas at the Energy and Mineral Resources Ministry on Friday (Dec. 21). The handover of IUPK-OP was witnessed by CEO of FCX Richard Adkerson, President Director of Inalum Budi Sadikin, Secretary General of the Energy Ministry Ego Syahrial, Secretary General of the Finance Ministry Hadiyanto and Inspector General of the Environment and Forestry Ministry Ilyas Asaad and Deputy State Enterprise Ministry for Mining, Strategic Industries and Media Fajar Harry Sampurno.

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

Written by Roffie Kurniawan (email: roffie.kurniawan@gmail.com)

Check Also

Indonesia’s Antam revenues surges 99.37% in 2018 on higher gold sales

JAKARTA (RambuEnergy.com) - Indonesia's state-owned gold and nickel miner PT Aneka Tambang Tbk (IDX:ANTM) booked ...

Leave a Reply

Your email address will not be published. Required fields are marked *