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Report: Freeport, Indonesia nearing deal to transfer Grasberg stake

The Indonesian government and Freeport-McMoRan Inc. could sign a new deal as early as Dec. 17 outlining plans for transferring a majority stake in the Grasberg copper-gold mine to Indonesia's state-owned PT Indonesia Asahan Aluminium, Bloomberg News reported Dec. 15, citing anonymous sources.

Under the transaction completion agreement, PT Indonesia Asahan Aluminium will look to acquire Rio Tinto's interest in Grasberg by March 2018 and then convert it into an equity stake, two of the sources said. Energy and Mineral Resources Minister Ignasius Jonan signaled the government's plans to acquire Rio Tinto's participating interest in Grasberg earlier in December.

Rio Tinto is entitled to 40% of Grasberg's copper production above specific levels until 2021 and 40% of all production thereafter. A recent Reuters analysis suggested Rio Tinto may be best served by divesting its interest in the Grasberg copper-gold mine.

Separately, an Indonesian government official told Reuters that Rio Tinto will not convert its 40% participating interest in Grasberg until 2022. "In 2022 it will automatically convert to a shareholding," the official was quoted as saying.

The anticipated deal will include a target to finalize the transfer of the Grasberg stake in the first quarter of 2018, according to Fajar Harry Sampurno, deputy minister of Indonesia's Ministry of State-Owned Enterprises.

In late August, Freeport agreed to divest a 51% interest in its PT Freeport Indonesia subsidiary to local parties and build a smelter in return for an extension to the mine's operating permit beyond 2021.

More recently, Indonesian State-Owned Enterprises Minister Rini Soemarno indicated the government expects to conclude the divestment deal by February 2018.