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Indonesia deal with Freeport likely to be in February 2018

Metal News - Published on Fri, 01 Dec 2017

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Bloomberg reported that Indonesia expects to conclude a deal by February with Freeport-McMoRan Inc that will see the US miner shed its majority ownership of the giant Grasberg copper mine, according to the government. The basic structure of the deal may be in place by the end of the year and signed by February, State-Owned Enterprises Minister Ms Rini Soemarno said in an interview in Jakarta on Tuesday. The government was happy with the progress of negotiations with Freeport and its partner Rio Tinto Group.

Mr Riza Pratama, a spokesman for Freeport’s local unit, said the negotiations were “going well” and were constructive. A Rio spokesman declined to comment.

Ms Soemarno’s comments signal easing of tension between the two sides after Freeport in September rebuffed government proposals on the valuation and method of divestment of the miner’s Indonesian unit within a framework agreement reached in August. Under the deal, state ownership will rise to 51 percent in exchange for a license that will allow Freeport to operate the project through 2041.

Ms Soemarno said that “Sometimes when we go to a negotiation table, you know everybody’s a bit suspicious of what’s what. But I think after a few sessions, all of us realize and believe that we want to do a good thing, the best thing for everybody, a win-win for everybody. We are in a good position and we are quite confident that we should be able to get it done by February. ”

Under Freeport’s pact with Indonesia, Grasberg will see an investment of as much as $20 billion through 2031 to further develop the mine, including the construction of a smelter. In January 2016, Freeport valued its Indonesian operations in a government filing, excluding an interest held by Rio, at $16 billion, according to Freeport Chief Executive Officer Richard Adkerson. Grasberg is the world’s second-largest copper and biggest gold mine.

Freeport has maintained that the divestment process was contingent on, among other things, reaching an agreement on “fair value” for the stake. How that value would be determined, and other details including timing were left to be negotiated later. Freeport also needs to reach an agreement with Rio Tinto over its income stream asset that’s part of the joint venture agreement. The minister said she happy with the progress of those two-way talks.

Ms Soemarno said that “We’re discussing with Rio Tinto, we’re discussing with Freeport, and Freeport is also discussing with Rio Tinto. So it becomes a three-way conversation, which I think, has gone very well. We’re very happy.”

Under an agreement struck in the 1990s to help Freeport finance an expansion of Grasberg, Rio is entitled to cash flows on a 40 percent share of production above specific levels until 2021 and on 40 percent of all production after that year. In August, Freeport’sAdkerson said the miner will need Rio’s approval for any changes.

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Posted By : Rabi Wangkhem on Fri, 01 Dec 2017
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