Rio Tinto has agreed to divest its 40% stake in Grasberg for $3.5bn to Indonesia’s state-run miner Inalum.

This deal sale is part of a three-way transaction that will see Indonesia acquire a controlling stake in the world’s second-largest copper mine Grasberg.
The country’s President Joko Widodo has pledged to improve domestic ownership in natural resources, and this move comes as he seeks re-election in 2019.

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Besides acquiring Rio’s stake in the mine, Indonesia’s state-run miner Inalum has also agreed to pay $350m to Freeport-McMoRan to acquire an additional 9.3% interest in the mine.

Freeport-McMoran is the operator of the mine.

Following the completion of the deals and Rio’s interest being converted into equity, Inalum will have 51% interest in the mine while the rest will be held by Freeport.

“This agreement marks a significant milestone towards establishing a new long-term partnership with the Republic of Indonesia.”

These transactions will bring an end to a tussle between Indonesia and Freeport.

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US-based Freeport will retain operational rights of the mine until 2041. It also seeks to retain core legal and financial safeguard aspects within its existing operating licence in order to proceed with the expansion work at the underground mine.

Freeport chief executive Richard Adkerson said: “This agreement marks a significant milestone towards establishing a new long-term partnership with the Republic of Indonesia to provide long-term stability for Grasberg.”

Situated in Papua province, the open pit mine at Grasberg complex lies in mountains capped with snow. Further, fog and heavy rains make mining conditions tough.

Since 1990s, Rio Tinto has been a partner in the mine. It had then agreed to help fund development of the mine in exchange for 40% share in production if they are above some levels, which would have increased to 40% of all output by 2023, reported Financial Times.