Freeport pressed to give most of Grasberg copper-gold mine to Indonesia ASAP
President Joko Widodo called company to end talks on rights to the mine.
Shares in Freeport McMoRan Inc (NYSE:FCX) took a hit Friday following news that the President of Indonesia has pressed the world’s second largest copper miner to wrap-up a deal in which the company gives a majority stake in its Grasberg mine to the country.
The deal, drafted in August, grants Indonesia a 51% ownership in the massive copper and gold mine and makes Freeport build smelters in the country. In return, the US miner would be allowed to keep Grasberg open until 2041.
The tentative agreement was meant to put an end to mounting public rage over foreign ownership of Indonesia’s biggest copper asset. It was also supposed to bring closure to years of disagreements between the Phoenix, Arizona-based company and the country’s government, which curbed output at the mine, impacting metals prices worldwide.
The parties, however, haven’t been able to agree on how the mine should be valued, or on what the timing and structure of the required divestment needs to be.
Indonesian President Joko Widodo stepped up pressure Thursday, calling Freeport to end talks as soon as possible. The public statement prompted chief executive Richard Adkerson to meet with Mining Minister Ignasius Jonan Friday morning, Reuters reports.
“It’s already been three years of heated arguing, but this is almost finalized,” Widodo said according to an official transcript of remarks he made to reporters in Banten province west of the capital Jakarta.
If it goes through, the deal would be a political victory for Widodo, who faces re-election in 2019 and who has insisted that mining companies must divest majority stakes in order to continue operating in the country.
Last year, Grasberg — the world’s largest gold mine and second-largest copper operation — generated more than 500,000 tonnes of copper and over 1 million ounces of gold.
The iconic mine is responsible for more than a quarter of Freeport’s total output.
Freeport’s stock was down roughly 1.8% to $14.481 in New York at 9:48AM local time.
More to come…