JAKARTA (TheInsiderStories)— PT Indonesia Asahan Alumunium (Inalum) is considering to raise funds through issuing bonds, as one of the options to fund the company’s plan to acquire 40 per cent participating interest of Australian miner Rio Tinto in in the Grasberg copper mine, a local media reported on Tuesday (03/04).
Inalum and U.S. gold and copper miner Freeport-McMoRan Inc (NYSE: FCX) are currently in an intense negotiation to determine the value of 40 per cent Rio Tinto’s share.
“If the company does not have enough funds, it will issue bonds,” The State-Owned Enterprise Ministry’s Undersecretary for Mining, Strategic Industries, and Media Affairs Fajar Harry Sampurno said on Monday (02/03), as quoted by Katadata.
Inalum’s CEO Budi Gunadi Sadikin earlier hinted that the company aims to buy the share at a reasonable price, and expected Rio Tinto’s board to accept the price they have offered. In calculating the price valuation of Rio Tinto’s 40 per cent participation rights, Inalum has hired Morgan Stanley, PWC and PT Danareksa Sekuritas.
Grasberg, located in Papua, is one of the world’s largest copper and gold mines in terms of ore reserves and production. Rio Tinto has a joint venture with Freeport for a 40 per cent share of production above specific levels until 2021 and 40 per cent of all production after 2022.
Currently, Freeport has asked for a guarantee on rights to mine Grasberg up to 2041 before committing to billions of dollars of planned underground mine investments and a second Indonesian copper smelter.
Minister of Energy and Mineral Resources (MEMR) Ignasius Jonan earlier announced that Freeport can apply for a 10-year permit extension over the near term, to extend its current one, due to expire in 2021. This means the world’s largest publicly-traded copper company could secure the privilege of extending its contract five years before it expires.
In return, the company has agreed to divest a 51 per cent stake in the local unit. Freeport has also agreed to build a copper smelter by Jan 2022 at the latest.