VANCOUVER (miningweekly.com) – The world’s largest publicly traded copper miner Freeport-McMoRan (FCX) has agreed, in principle, to divest its flagship asset, giving Indonesia a 51% stake of the massive Grasberg copper/gold mine.

The Phoenix, Arizona-based miner's announcement sent the company’s NYSE-listed stock falling nearly 6% on Tuesday to $14.43 apiece in early trading.

Freeport directly owns 81.28% of PT Freeport Indonesia (PT-FI) and also has a 9.36% indirect stake through a subsidiary. The Indonesian government owns the other 9.36%. Lifting the Indonesian stake to 51% would mean selling another 41.64% of its stake. Grasberg is the world’s second-largest copper mine.

Subject to executing definitive documentation and board and partner approvals, subsidiary PT-FI will divest its ownership in PT-FI at fair market value so that Indonesia interests own 51% of PT-FI's shares. Freeport noted that the timing and process of divestment was being discussed with the government, but would be structured so that FCX will retain control over operations and governance of PT-FI.

FCX has also agreed that PT-FI will convert its ‘contract of work’ to a special licence (IUPK) that will provide PT-FI with long-term operating rights through 2041, with government providing certainty of fiscal and legal terms during the term of the IUPK.

PT-FI will also commit to construct a new smelter in Indonesia within five years.

“Reaching this understanding on the structure of a mutual agreement is significant and positive for all stakeholders. Important work remains on documenting this agreement and we are committed to completing the documentation as soon as possible during 2017,” stated president and CEO Richard Adkerson in a news release.

The world’s second-biggest miner, Rio Tinto Group, also has an interest in Grasberg through a joint venture with Freeport. Under the terms of their partnership, Rio is entitled to a 40% share of output above specific levels until 2021 and 40% of all production after that year.

Following a January ban on ore and concentrate exports, which resulted in a 15-week shutdown, Grasberg received a temporary licence in April, allowing copper concentrate exports until October.

As part of a plan to lower costs, Freeport this year cut 10% of its Indonesian workforce of 32 000. That sparked a strike that has been extended for a fourth month to the end of August.

The revised Indonesian rules require miners to divest a 51% stake, relinquish arbitration rights and pay new taxes and royalties.