PHOENIX--(BUSINESS WIRE)--
Freeport-McMoRan Inc. (NYSE: FCX) announced today the completion of its
transaction with the Indonesian government regarding PT Freeport
Indonesia’s (PT-FI) long-term mining rights and share ownership.
FCX expects its share of future cash flows of the expanded PT-FI asset
base, combined with the cash proceeds received in the transaction, to be
comparable to its share of anticipated future cash flows under PT-FI’s
previous Contract of Work and joint venture arrangements with Rio Tinto
(Joint Venture).
Richard C. Adkerson, Vice Chairman of the Board, President and Chief
Executive Officer, said, "The completion of this transaction reflects
the culmination of a multi-year process to accomplish a 'win/win'
outcome for all parties. This landmark event establishes the beginning
of a new long-term partnership between FCX and the Republic of Indonesia.
Under the leadership of President Joko Widodo and the Ministry of
Energy and Mineral Resources, the Ministry of Finance, the Ministry of
Environment and Forestry, the Ministry of State Owned Enterprises and
BKPM (Indonesia’s Investment Board), and with support from the
provincial and regional governments, we have developed a new structure
that will bring greater benefits to the people of Indonesia while
providing investment certainty for FCX’s major investments in Indonesia.
"Both FCX and the Government of Indonesia take pride in what we have
accomplished together at the Grasberg operation in Papua, which has been
developed into one of the world’s largest copper and gold mining assets.
We look forward to a future of enhanced long-term stability for PT-FI’s
operations, the continued application of best practices for
environmental management and to providing greater benefits to the people
of Papua, to the Republic of Indonesia and to local employees, suppliers
and contractors while generating attractive returns for our
shareholders."
COMPLETION OF DIVESTMENT TRANSACTION
PT Indonesia Asahan Aluminium (Persero) (PT Inalum), a state-owned
enterprise that is wholly owned by the Indonesian government, completed
the previously announced $3.5 billion cash acquisition of all of Rio
Tinto's interests associated with its joint venture with PT-FI (Joint
Venture), and the $350 million cash acquisition of 100 percent of FCX's
interests in PT Indonesia Papua Metal dan Mineral (formerly known as PT
Indocopper Investama), which owns 9.36 percent of PT-FI.
In connection with the transaction, the Joint Venture interests are
being merged into PT-FI in exchange for a 40 percent share ownership in
PT-FI. As a result, PT Inalum and the provincial/regional government’s
share ownership of PT-FI approximates 51.2 percent of PT-FI and FCX's
share ownership approximates 48.8 percent.
The arrangements provide for FCX and the pre-transaction PT-FI
shareholders to retain the economics of the revenue and cost sharing
arrangements under the Joint Venture. As a result, FCX’s economic
interest in PT-FI is expected to approximate 81.28 percent through 2022.
FCX will continue to manage the operations of PT-FI.
EXTENSION OF MINING RIGHTS
The Government of Indonesia has granted PT-FI a new special mining
license (IUPK) to replace PT-FI’s Contract of Work, enabling PT-FI to
conduct operations in the Grasberg minerals district through 2041. Under
the terms of the IUPK, PT-FI has been granted an extension of mining
rights through 2031, with rights to extend mining rights through 2041
subject to PT-FI completing the construction of a new smelter and
fulfilling its defined fiscal obligations to the Indonesian government.
PT-FI has committed to construct a new smelter in Indonesia within five
years of the closing of today’s transaction. PT-FI is initiating
front-end engineering and design and intends to pursue financing,
commercial and potential partner arrangements for this project. The
economics for PT-FI’s share of the new smelter will be borne by PT-FI’s
shareholders according to their respective ownership percentages.
The fiscal terms are set forth for the term of the IUPK through 2041.
The key fiscal terms include a 25 percent corporate income tax rate, a
10 percent profits tax on net income and royalties of 4 percent for
copper and 3.75 percent for gold.
The IUPK and related documentation provide legal assurances and
investment protections for PT-FI and FCX.
PT-FI and Indonesia’s Ministry of Environment and Forestry (the MOEF)
have established a new framework for continuous improvement, including
initiatives that PT-FI will pursue to increase tailings retention and to
evaluate large-scale beneficial uses of tailings within Indonesia. The
MOEF has issued a new decree that incorporates various initiatives and
studies to be completed by PT-FI that would target continuous
improvement in a manner that would not impose new technical risks or
significant long-term costs to PT-FI’s operations. The new framework
enables PT-FI to maintain compliance with site-specific standards and
provides for ongoing monitoring by the MOEF.
FCX is a leading international mining company with headquarters in
Phoenix, Arizona. FCX operates large, long-lived, geographically diverse
assets with significant proven and probable reserves of copper, gold and
molybdenum. FCX is the world’s largest publicly traded copper producer.
FCX’s portfolio of assets includes the Grasberg minerals district in
Indonesia, one of the world’s largest copper and gold deposits;
significant mining operations in the Americas, including the large-scale
Morenci minerals district in North America and the Cerro Verde operation
in South America. Additional information about FCX is available on FCX’s
website at “fcx.com.”
Cautionary Statement Regarding Forward-Looking Statements: This
press release contains forward-looking statements, which are all
statements other than statements of historical facts, such as
expectations relating to FCX’s economic interest in PT-FI through 2022,
PT-FI’s development, financing, construction and completion of a new
smelter in Indonesia, PT-FI’s compliance with environmental standards
under the new framework established by the MOEF, and FCX’s share of
future cash flows of the expanded PT-FI asset base. The words
“anticipates,” “may,” “can,” “plans,” “believes,” “estimates,”
“expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,”
“to be,” “potential” and any similar expressions are intended to
identify those assertions as forward-looking statements.
FCX cautions readers that forward-looking statements are not
guarantees of future performance and actual results may differ
materially from those anticipated, expected, projected or assumed in the
forward-looking statements. Important factors that can cause FCX’s
actual results to differ materially from those anticipated in the
forward-looking statements include, but are not limited to, supply of
and demand for, and prices of, copper, gold and molybdenum; mine
sequencing; production rates; potential inventory adjustments; potential
impairment of long-lived mining assets; the potential effects of
violence in Indonesia generally and in the province of Papua; industry
risks; regulatory changes; political risks; labor relations; weather-
and climate-related risks; environmental risks; litigation results
(including the outcome of Cerro Verde’s royalty dispute with the
Peruvian national tax authority); and other factors described in more
detail in Part I, Item 1A. “Risk Factors” of FCX’s annual report on Form
10-K for the year ended December 31, 2017, and Part II, Item 1A. “Risk
Factors” of FCX’s subsequent quarterly reports on Form 10-Q, filed with
the SEC.
Investors are cautioned that many of the assumptions upon which FCX’s
forward-looking statements are based are likely to change after the
forward-looking statements are made, including for example commodity
prices, which FCX cannot control, and production volumes and costs, some
aspects of which FCX may not be able to control. Further, FCX may make
changes to its business plans that could affect its results. FCX
cautions investors that it does not intend to update forward-looking
statements more frequently than quarterly notwithstanding any changes in
its assumptions, changes in business plans, actual experience or other
changes, and FCX undertakes no obligation to update any forward-looking
statements.
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Freeport-McMoRan Inc.
Financial Contacts:
Kathleen L. Quirk,
602-366-8016
or
David P. Joint, 504-582-4203
or
Media
Contact:
Linda S. Hayes, 602-366-7824
Source: Freeport-McMoRan Inc.