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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version on businesswire.com: https://www.businesswire.com/news/home/20181221005225/en/
Freeport-McMoRan Inc.Financial Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint, 504-582-4203orMedia Contact:Linda S.
Hayes, 602-366-7824
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