Grasberg Mine - Photo by: Freeport Indonesia

JAKARTA (TheInsiderStories) – Global miner Rio Tinto Group (ASX: RIO) said the discussion of its divestment of 40 per cent interest in the giant Grasberg copper and gold mine in Papua is still on going.

The mining giant said discussions about the sale – including the price – are underway with with aluminium manufacturer and supplier, PT Indonesia Asahan Aluminium (Inalum) and Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX).

No agreement has been reached and there is no certainty that binding agreements would be signed, Rio said in a statement noting reports of the potential purchase by Indonesia’s state mining holding company Inalum of Rio’s interest in Grasberg for US$3.5 billion.

“Rio Tinto confirms that discussions between Rio Tinto, Inalum and Freeport are ongoing, including as to price,” Rio said on Wednesday (23/5) in a statement to the ASX.

The company has moved into direct negotiations with the Indonesian government over the proposed sale of its 40 per cent share of future production from the Grasberg mine, the U.S operator of the controversial but massive Papuan copper and gold project has revealed.

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.

The discussions have dragged on for several years and have been a major distraction for Freeport’s management team, which is led by chief executive Richard Adkerson. However, in recent months the outlines of a deal have emerged.

For Rio, selling down its interest in Grasberg would allow the company to exit a challenging mining jurisdiction and focus on its core assets. It would also open Rio’s share register to investors who cannot invest in the company because of environmental concerns related to some of the processes used at Grasberg.

But, it offered few new details, disappointing analysts who said the talks were likely to drag on. Freeport had hoped to reach a deal by the end of June when a temporary mining license is due to expire. Shares in Freeport fell 9.6 per cent to $17.