The Indonesian government plans to buy Rio Tinto (LON:RIO) out of its stake in the world’s second largest copper mine, The Times has reported. The blue-chip miner currently holds a 40-percent stake in Freeport-McMoRan’s Grasberg operation.
Rio Tinto’s share price has fallen deep into the red in London this morning, tracking copper prices lower. As of 08:50 GMT, the shares were changing hands 1.46 percent lower at 3,419.00p, underperforming the benchmark FTSE 100 index which is currently 0.32 percent worse off at 7,304.19 points.
Rio poised to sell copper project stake
The Times reports that Rio Tinto has a 40-percent stake in Freeport-McMoRan’s Grasberg operation in Indonesia. Freeport said in August that it would divest 51 percent of PT Freeport Indonesia to the Indonesian government to meet local ownership rules, raising a question mark over the London-listed miner’s stake.
The newspaper quoted Ignasius Jonan, the energy and mineral resources minister, as saying that the drafting of an agreement had begun and that the state-owned enterprise ministry and other government bodies aimed to complete the acquisition next year. Under the proposal, Indonesia’s existing 9.4 percent stake in Freeport Indonesia would be diluted to about five percent. Budi Gunadi Sadikin, chief executive of PT Inalum, the state-owned mining holding company that is tipped to acquire the stakes.
Jefferies flags more capital returns
In a separate development, Jefferies reaffirmed its ‘buy’ recommendation on Rio Tinto yesterday, following the blue-chip miner’s annual investor seminar reiterated its focus on productivity and cashflow.
“We expect earnings margins and free cashflow generation for Rio to be high through the cycle. Rio’s balance sheet is strong as well, and the company therefore has the financial flexibility to increase its capital returns,” the broker’s analyst Christopher LaFemina commented, as quoted by Citywire.