Deep sea mining puts $560 billion in land extraction at risk — report
Even in optimal scenarios, the activity would generate only $6.25 million in tax revenue for countries involved, says Planet Tracker.
World’s No.2 miner Rio Tinto (ASX, LON, NYSE: RIO) confirmed Wednesday is ready to sell its stake in the giant Grasberg mine, the world’s second largest copper operation, to Indonesia’s state mining holding company Inalum for $3.5 billion.
The move could mark the end to a long-drawn-out, three-way dispute over the mine, which has been centered on bringing local ownership of Grasberg up to 51%, a main requisite set by the Indonesian government to allow Freeport-McMoRan (NYSE:FCX) to keep operating in the country.
Grasberg’s operator, Freeport McMoRan, agreed last year to divest 51% of PT Freeport Indonesia to the country’s government. But until today, it wasn’t clear what would happen to Rio’s interest in the mine.
Discussions with PT Indonesia Asahan Aluminium, known as Inalum, and Freeport — the other two companies engaged in talks — were ongoing, Rio said, “including as to price,” noting that no agreement had been reached.
Rio’s deal with Freeport was struck in 1995 and entitles it to a 40% share of production when certain output levels are hit. But as a result of strikes and other disruptions and as the open pit at Grasberg nears the end of its life, the Melbourne-based miner hasn’t seen any benefit since 2014.
Chief executive Jean-Sebastien Jacques publicly questioned Grasberg’s place in Rio’s future back in February 2017. He followed in June with a remark about the mine being a world-class copper deposit, which might not be a world-class mining investment.
“There is a fundamental difference between a world-class resource and a world-class business,” he said again last week at the Bank of America Merrill Lynch Global Mining, Metals & Steel Conference.
Indonesia and Freeport have been negotiating the terms for the company to give the government a majority ownership in Grasberg for over a year. But until today, it wasn’t clear what would happen to Rio’s interest in the mine.
Grasberg, the world’s second-largest copper mine and fourth largest gold operation, has transitioned to a fully underground operation, set to reach full capacity by 2022, when it will produce 160,000 tonnes per day of ore.
The additional Deep Mill Level Zone block cave mine, currently under construction, is projected to contribute an additional 80,000 tonnes per day of ore once at full capacity, expected in 2021.
2 Comments
Mike Failla
About time they got this albatross off of their necks. Its never good to be held up by extortion by government. I have said before it is time for freeport and rio to get back to stable mining friendly countries. Rio can now get rolling on resolution and freeport is now going to be minority. Maybe that is not such a bad thing in the long run as grasberg has a long life left in it. Maybe its really a win-win? Rio will still enjoy the benefits without the headaches long term.
Paul Sawyer
Every time I see an add on TV about what a great place Indonesia is to invest in, I think about Grasberg. The government may of gotten their way with Freeport and Rio Tinto, but I am sure that this has had a chilling effect on future investment in the country.