Morningstar | Freeport Officially Closes Grasberg Deal With Indonesian Government; No Change to Our Outlook. See Updated Analyst Note from 21 Dec 2018
On Dec. 21, Freeport-McMoRan announced that the company officially closed the transaction to sell a portion of the Grasberg mine to the Indonesian government. Accordingly, Freeport received the cash proceeds from the sale. Our forecast already assumed the transaction would close by the end of 2018 and, with no changes to our outlook, we maintain our $8.20 per share fair value estimate for no-moat Freeport. We continue to view shares as overvalued, trading roughly 25% above our fair value estimate.Under the agreement, Freeport sold a 9.36% stake in PT-FI for $350 million. PT-FI is a joint venture--owned by Freeport and the Indonesian government--that owns 100% of the Grasberg mine. Based on the agreement, Freeport will retain the economic equivalent of an 81.28% stake in the mine until 2022. In 2022, Freeport's stake will fall to 48.8%. Before the agreement with the government was reached, Freeport's stake was set to fall to 54.4% in 2022 as Rio Tinto would have assumed a 40% equity stake in the mine from PT-FI. Rio Tinto's entire stake will also be sold to the Indonesian government for $3.5 billion.
Freeport-McMoRan is a holding company. Through its subsidiaries, the company is a mining company. The company operates assets with proven and probable reserves of copper, gold and molybdenum, and the company is a publicly traded copper producer. The company's portfolio of assets includes the Grasberg minerals district in Indonesia, copper and gold deposits; and mining operations in North America and South America, including the Morenci minerals district in Arizona and the Cerro Verde operation in Peru. The company has organized its mining operations into four primary divisions: North America copper mines, South America mining, Indonesia mining and Molybdenum mines.
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