Indonesia’s PT Inlam closes $3.85 bln Freeport acquisition deal

“Today is a historical moment since Freeport began operating in Indonesia in 1973,” Indonesian President Joko Widodo told reporters at a press conference. For Widodo, who is seeking reelection next year, an Indonesian acquisition of a majority stake in the mine is a political boon.

“Everything has been completed, and now all that’s left is the work,” Widodo said.

The landmark deal, which hands Inalum a 51.23 per cent stake in PT Freeport Indonesia, ends years of tough and often fractious negotiations over ownership rights to Grasberg, amid a push by Jakarta to gain greater control over its mineral wealth.

Freeport-McMoRan Inc had, in September, entered into a divestment agreement under which it would sell 41.84 per cent equity stake in PT Freeport Indonesia (PT-FI) for cash consideration of $3.85 billion.

As per the terms of the agreement, the Indonesian state-owned enterprise PT Indonesia Asahan Aluminium (Persero) (Inalum) will acquire for cash consideration of $3.85 billion all of Rio Tinto's interests associated with its joint venture with PT-FI, and 100 per cent of FCX's interests in PT Indocopper Investama (PT-II), which owns 9.36 per cent of PT-FI.

Under the terms of the Divestment Agreement, the Rio Tinto interests will be merged into PT-FI concurrent with Inalum’s acquisition in exchange for a 40 per cent share ownership in PT-FI. The arrangements provide for FCX and existing PT-FI shareholders to retain the economics of the revenue and cost sharing arrangements under the joint venture. Following completion of the transactions, PT-FI will have an expanded asset base to include the Rio Tinto interests and Inalum's share ownership will be 51.2 per cent of PT-FI (subject to a dividend assignment mechanism to replicate the joint venture economics), and FCX's ownership will be 48.8 per cent.

At closing, Rio Tinto will receive $3.5 billion, and FCX will receive $350 million, in cash proceeds.

Following completion of the transaction, FCX expects its share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to its existing share of future cash flows under the current Joint Venture arrangements. FCX will continue to manage the operations of PT-FI.

The transaction, which is expected to close by the first quarter of 2019, is subject to certain conditions including, the extension and stability of PT-FI's long-term mining rights through 2041 in a form acceptable to FCX and Inalum, resolution of environmental regulatory matters satisfactory to the Indonesian government, FCX and Inalum, various other Indonesian regulatory actions and approvals, and customary approvals from international competition authorities.

FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX is the world’s largest publicly traded copper producer.

FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.