[ferro-alloys.com]World’s No.2 miner Rio Tinto (ASX, LON, NYSE: RIO) said Thursday it had sold its 40% stake in the giant Grasberg mine, the world’s second largest copper operation, to Indonesia's state mining company PT Indonesia Asahan Aluminium (Inalum) for $3.5 billion.

The deal is expected to end to a long-drawn-out, three-way dispute over the mine, which has been centred on bringing local ownership of Grasberg up to 51%, a main requisite set by the Indonesian government to allow Freeport-McMoRan (NYSE:FCX), operator of Grasberg, to keep doing so.

Rio had a joint venture with Freeport for a 40% share of Grasberg's production above specific levels until 2021 and 40% of all production after that. But as a result of strikes and other disruptions and as the open pit at Grasberg nears the end of its life, the Melbourne-based miner hasn’t seen any benefit since 2014.

Freeport separately said it had inked a final agreement with PT Inalum through which it cedes the Indonesian miner majority control of Grasberg.

The three-way pact would see Inalum pay $3.85 billion for a 51% stake, increasing Indonesia’s holding from just over 9%. After the sale, Rio Tinto will cash out of its interest in the mine, while Freeport will receive $350 million and the right to remain as operator of Grasberg until 2041.

As Indonesia heads to presidential elections next year, sealing a deal to get a majority stake in Grasberg was a priority for President Joko Widodo, who most analysts expect will seek a second term in office.

Bloomberg Intelligence estimates that Grasberg’s reserves are worth about $14 billion. Indonesia accounted for 47% of Freeport’s operating income in 2017, according to data compiled by Bloomberg.

Grasberg, the world’s second-largest copper mine and fourth largest gold operation, is transitioning to an underground operation, set to reach full capacity by 2022, when it will produce 160,000 tonnes per day of ore. Today's deal secures much-needed investment to develop underground mines at the site.

The additional Deep Mill Level Zone block cave mine, currently under construction, is projected to contribute an additional 80,000 tonnes per day of ore once at full capacity, expected in 2021.

• [Editor:王可]