Rio Tinto Limited (ASX: RIO) could be ready to offload its stake in the giant gold and copper mine, Grasberg, for around $3.5 billion to Freeport-McMoRan Inc (NYSE: FCX) and Inalum.
Grasberg, in Indonesia, is believed to be one of the largest gold mines and the second-largest copper mine on earth. The mine is run and owned a subsidiary of US-based Freeport-McMoRan Inc (NYSE: FCX). Rio Tinto holds a 40% share of production in excess of certain levels until 2021 and will receive 40% of all production beyond that date.
Following rumours surfaced by Bloomberg, Rio Tinto has moved to confirm it is in talks to sell.
In an announcement to the ASX today, the mining giant said it is in negotiations with Freeport and the state-owned PT Indonesia Asahan Aluminium (Persero), known as Inalum.
While Rio confirmed the talks it said the parties are not yet settled on a price.
“Rio Tinto confirms that discussions between Rio Tinto, Inalum and Freeport are ongoing, including as to price,” Rio Tinto’s announcement read. “No agreement has been reached, and there is no certainty that binding agreements will be signed.”
A potential sale of Grasberg would follow other divestments by Rio in recent times, including the sale of its stake in the Kestrel mine in Queensland for $2.25 billion and its stake in Winchester South for $200 million.
“As you will have seen, with the recent announcements of the divestment of our remaining Australian coal assets, the process of reshaping our portfolio has continued this year,” Rio Tinto Chairman Simon Thompson said at the company’s recent AGM.
“At our annual meeting two years ago we outlined a new, more flexible, dividend policy, which aims to return between 40 and 60 per cent of underlying earnings to shareholders, through the cycle.”
Last year, Rio Tinto announced dividends totalling $US2.90 per share.
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