Freeport, Rio Tinto Agree to Prelim $3.85 Billion Deal to Transfer Majority Control of Mine to Indonesia -- Update

By Ben Otto and Anita Rachman

JAKARTA, Indonesia--Freeport-McMoRan Inc., Rio Tinto and Indonesia unveiled a tentative $3.85 billion deal that would give Jakarta majority control of the world's second-biggest copper mine.

The preliminary agreement signed Thursday comes after a yearslong conflict that has spooked mining investors and threatened metal supplies.

Under the tentative deal, Indonesia agreed to pay a combined $3.85 billion to mining titans Freeport and Rio Tinto for a controlling stake in Grasberg, a massive copper-and-gold mine that has been run by Freeport in the country's remote east since the early 1990s.

The deal would raise Indonesia's stake in the lucrative mine to about 51% from less than 10% currently.

In a two-step deal, state-owned mining holding company PT Indonesia Asahan Aluminium, or Inalum, would pay $3.5 billion for an interest Rio Tinto holds in Grasberg, Inalum head Budi Gunadi Sadikin told reporters. Freeport would then convert that interest into an equity stake and sell Inalum an additional, approximately 9% stake for $350 million, giving Indonesia a controlling stake, Mr. Sadikin said.

Rio Tinto in a news release confirmed the deal's proposed price for its production interest in Grasberg and said the agreement was nonbinding. The Anglo-Australian company said all parties would seek to sign a binding deal by the end of the year.

Reza Pratama, a Freeport spokesman, confirmed the proposed $3.85 billion of payments.

Rio Tinto's U.S.-listed shares rose 1.2% in premarket trade and U.S.-based Freeport's stock gained 1.8%.

--Deden Sudrajat contributed to this article

Write to Ben Otto at ben.otto@wsj.com and Anita Rachman at anita.rachman@wsj.com

(END) Dow Jones Newswires

July 12, 2018 07:54 ET (11:54 GMT)

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