Minister: SOE to acquire Rio Tinto?s interest in Grasberg mine

The government through an appointed state-owned enterprise (SOE) will acquire Rio Tinto?s 40 percent participating interest in the Grasberg mine in Papua Province operated by gold and copper giant PT Freeport Indonesia (PTFI), according to Minister of Energy and Mineral Resources Ignasius Jonan.

Speaking during a hearing with the House of Representatives Commission VII on energy and mining on Tuesday, Jonan said that while negotiations are still in progress, Freeport McMoRan, the parent of PTFI, has agreed in principle for the government to acquire the Rio Tinto participating interest in the Grasberg project on the condition that the latter company agrees to sell its interest.

?The 40 percent participating interest of Rio Tinto will be acquired by an SOE, to be appointed by the government, together with local company (owned by the Papua administrations) and major tribal groups related to the Freeport Indonesia operations,? Jonan said.

He said that the acquisition of the Rio Tinto 40 percent participating interest forms part efforts to realize the government?s plan to acquire a total of 51 percent shares in PTFI. The government plans to appoint state-owned PT Indonesia Asahan Aluminium (Inalum) to acquire the PTFI shares. Jonan expects the acquisition can be realized next year.

Rio Tinto and Freeport McMoRan signed a funding and operation agreement in 1995, entitling the former to 40 percent of PTFI production through 2021. It remains unclear, however, whether Rio Tinto would convert its rights over the production and operation of the mine into a participating interest. A senior government official previously said that Rio Tinto could become a stumbling block in the government?s efforts to get the 51 percent shares in PTFI. (*)