The Indonesian unit of Freeport McMoran Copper & Gold Inc which runs Grasberg mine in Papua said on Wednesday it is in talks with the local government in Papua about selling it a stake in the unit.
Freeport owns 90.64 percent of the subsidiary, PT Freeport Indonesia, which operates the huge Grasberg copper and gold mine in far-flung Papua province. The Indonesian government owns the remaining 9.36 percent.
“Dialogue and negotiations are ongoing about the possibility of the government of Papua province obtaining ownership shares in PT Freeport Indonesia,” Mindo Pangaribuan, spokesman of PT Freeport Indonesia, said in a statement emailed to Reuters.
“The stakes offered will be Freeport’s shares,” he added, and offered to the Papua provincial government. However, he did not say how big a stake would be sold, or give details of payment, as talks are still in progress.
One possibility reported in local media is that the local government could take the shares in return for part of the royalties it receives from Freeport.
Last year, state miner PT Aneka Tambang Tbk said it might buy a stake of up to 18.72 percent in PT Freeport Indonesia in a deal estimated to be worth about $3 billion. But the deal did not go ahead.
PT Freeport Indonesia has paid an estimated $6.9 billion in the form of royalties, dividends, and taxes to the central government between 2004-2009, of which 9.4 percent is paid to the local governments, the firm said in a statement to parliament recently.
Freeport, unlike some other foreign mining firms in Indonesia such as Newmont Mining Corp. , is not under any obligation to reduce its stake in its local unit.
The head of Indonesia Stock Exchange has said he is keen to get local units of international mining firms such as Freeport and Newmont to list on the bourse to lift trading and lure investors. [ID:nJAK105175]
Grasberg, which has the world’s largest recoverable reserves of copper and the largest gold reserve, accounts for nearly 40 percent of Freeport’s total copper reserves of 93 billion pounds, according to the firm’s website. The mine is about 3,350 km east of Indonesia’s capital Jakarta.
Freeport is the world’s largest publicly traded copper miner. PT Freeport Indonesia expects to produce 1.4 billion pounds of copper in 2010, unchanged from this year.