NUSA DUA, Indonesia (Reuters) – Freeport-McMoRan Inc’s (FCX.N) divestment of a controlling interest in Indonesia’s Grasberg mine is still planned for 2018, even though the price and some contract terms are still to be agreed, the head of state mining holding company PT Inalum said.
Inalum, which is arranging funding for the deal, already has a “committed” loan for the transaction with Freeport and Rio Tinto (RIO.AX) for the majority stake in Grasberg, Inalum’s Budi Gunadi Sadikin told a briefing on Tuesday, on the sidelines of the Coaltrans Asia conference in Bali.
Indonesian President Joko Widodo had instructed his administration to complete negotiations to buy a majority stake in the world’s second-biggest copper mine by end-April.
This includes buying Rio Tinto’s participating interest, which entitles it to a 40 percent share of all production after 2022, and converting that holding into shares in the mine.
But Freeport said last month that new environmental demands from Indonesia’s government on managing mine waste could delay a new contract for its massive Grasberg copper mine, and in turn could throw the timing of divestment into question.
Freeport Chief Executive Richard Adkerson last month described the new demands as “shocking” and “disappointing” but said he was confident a resolution would be found.
“In the last 18 months there have been many issues popping up. This is only a normal blip,” said Sadikin, when asked if the new environmental issues would delay the divestment deal.
Freeport has said that divestment of a majority stake must be part of a package that guarantees its long-term right to Grasberg and fiscal certainty as well.
“The perception is that in Indonesia the regulations change easily, (which) makes it difficult for them to calculate their finances,” Sadikin said.
So as part of the divestment deal, Freeport wants a clear fiscal regime that governs taxes and royalties during the term of its contract to work the mine.
Sadikin said Freeport Indonesia would remain mine operator after divestment and said “we’re getting closer and closer” to a deal and that it could still be concluded in 2018.
Price was still one of the central issues in talks over the deal, Sadikin said.
“It’s just a matter of meeting at a point where everyone is slightly grumpy. If one side is happy and one side is very grumpy it’s not good,” he said.
Reporting by Fergus Jensen; Writing by Ed Davies; Editing by Tom Hogue
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