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Indonesia plans to acquire Rio Tinto interest in Freeport Indonesia mine

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Indonesia plans to acquire Rio Tinto's 40 per cent participating interest in the giant Grasberg copper mine operated by the local unit of Freeport-McMoRan, the mining minister said.

[JAKARTA] Indonesia plans to acquire Rio Tinto's 40 per cent participating interest in the giant Grasberg copper mine operated by the local unit of Freeport-McMoRan, the mining minister said.

Under a joint venture formed in 1996, Rio has a 40 per cent interest in Freeport's Grasberg contract, which entitles them to a 40 per cent share of all production after 2022.

Under a framework agreement announced in August, Phoenix, Arizona-based Freeport said it would divest 51 per cent of PT Freeport Indonesia to the Indonesian government, but the fate of Rio's interest in the mine has been unclear.

Indonesia plans in 2018 to complete the acquisition of Rio's interest in the mine, as well as the purchase of a 51 per cent stake in Freeport Indonesia by the Ministry of State-Owned Enterprises (SOE) and other government units, Energy and Mineral Resources Minister Ignasius Jonan said on Tuesday.

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"To achieve the 51 per cent, there's Rio Tinto's 40 per cent participating interest that will be acquired by the State-Owned Enterprise Ministry, which has been appointed by the government, along with regional-owned enterprises and (Papuan) tribes linked to the operations of PT Freeport Indonesia," said Jonan.

"Negotiations are underway and discussion of legal drafting have begun," Jonan added, noting that the talks were being conducted by the companies along with the Ministry of Finance and SOE ministry.

A 9.36 per cent stake in Freeport Indonesia held by PT Indocopper Investama, which is wholly owned by Freeport McMoRan, will also be bought by the government, he said.

The government expects a written agreement on the matter, along with new fiscal terms in a special mining permit, in the near-term, he said.

A Melbourne-based spokesman for Rio declined to comment. A spokesman for Freeport Indonesia also declined to comment.

A review of two decades of annual reports shows Rio's capital expenditures on Grasberg reached nearly US$2 billion, while its net profit add up to just US$1.7 billion.

REUTERS