Rio Tinto seals $4.8bn Grasberg mine exit
The sale paves the way for more returns to shareholders.
Rio Tinto has sealed a $US3.5 billion ($4.8bn) deal to exit the controversial Grasberg copper and gold mine in Indonesia by selling to government miner Inalum, paving the way for more returns to shareholders.
The deal supersedes a non-binding agreement signed with Inalum and mine operator Freeport McMoran in July.
Under the deal, the conditions of which remains unchanged, Inalum will take a 51 per cent stake in Grasberg by acquiring Rio’s effective 40 per cent stake and a smaller stake from Freeport.
Rio Tinto chief executive Jean-Sebastien Jacques said: “This agreement is a significant step towards the sale of our interest in Grasberg and provides further evidence of our commitment to strengthening the portfolio by selling non-core assets and driving higher returns across the business.
“We will continue to shape the portfolio, maintain a strong balance sheet and allocate capital to the highest value opportunities in order to ensure that Rio Tinto continues to deliver sector leading returns to shareholders.”
Rio did not say how much of the proceeds deal, if it is approved by regulators, will go to shareholders. “The proceeds of the sale are to be paid in cash to Rio Tinto at closing, with the funds to be used for general corporate purposes,” it said.
When the deal was struck in July, the price was better than analysts had previously thought the big miner could get for the interest in the mine, which has safety and community issues and releases non-toxic mine waste, or tailings, into the local river system, against Rio policy.
The deal is expected to represent more cash returns for Rio investors, who are already looking at $US12bn of cash returns this year, including from the most recent final and interim dividends, and buybacks to distribute proceeds of sales of Rio’s coal assets.
It is part of a $US3.9bn three way agreement, with a smaller deal between Freeport and Inalum. “The transaction and the Inalum/Freeport transaction, which are interconditional, are each subject to a number of conditions precedent being satisfied,” Rio said. “Subject to conditions being met, completion is expected to occur in the first half of 2019.”