Worlds No.2 miner Rio Tinto confirmed Wednesday is ready to sell its stake in the giant Grasberg mine, the worlds second largest copper operation, to Indonesias state mining holding company Inalum for $ 3.5 billion.
The move could mark the end to a long-drawn-out, three-way dispute over the mine, which has been centered on bringing local ownership of Grasberg up to 51%, a main requisite set by the Indonesian government to allow Freeport-McMoRan to keep operating in the country.
Rios deal with Freeport was struck in 1995 and entitles it to a 40% share of production when certain output levels are hit. But as a result of strikes and other disruptions and as the open pit at Grasberg nears the end of its life, the Melbourne-based miner hasnt seen any benefit since 2014.
Chief executive Jean-Sebastien Jacques publicly questioned Grasbergs place in Rios future back in February 2017. He followed in June with a remark about the mine being a world-class copper deposit, which might not be a world-class mining investment.
Indonesia and Freeport have been negotiating the terms for the company to give the government a majority ownership in Grasberg for over a year. But until today, it wasnt clear what would happen to Rios interest in the mine.
Grasberg, the worlds second-largest copper mine and fourth largest gold operation, has transitioned to a fully underground operation, set to reach full capacity by 2022, when it will produce 160,000 tonnes per day of ore.
The additional Deep Mill Level Zone block cave mine, currently under construction, is projected to contribute an additional 80,000 tonnes per day of ore once at full capacity, expected in 2021.