The recent visit of Indonesia Stock Exchange (IDX) General Director Tito Sulistio and Director of Corporate Listing Samsul Hidayat to Freeport Indonesia's Grasberg mine in Timika (Papua), signals that the subsidiary of US-based natural resources company Freeport McMoRan Copper & Gold Inc is serious about studying the possibility to divest a 10.64 percent stake through an initial public offering (IPO) on the IDX. Both Directors met Freeport Indonesia's General Director Maroef Sjamsoeddin at the world’s largest gold mine and third-largest copper mine.
Currently, Freeport McMoRan Copper & Gold Inc owns a 90.64 percent stake in Freeport Indonesia (either directly or through Indocopper Investama), while the central government of Indonesia owns the remaining 9.36 percent. However, based on (re)negotiations with the Indonesian government, Freeport McMoRan Copper & Gold needs to divest a further 10.64 percent to one or more Indonesian parties this year. The miner is currently searching for the best solution to divest the 10.64 percentage point stake.
Based on Freeport Indonesia's assets, the 10.65 percent stake would be worth about USD $841 million (IDR 11.6 trillion). However, taking into account the amount invested in Indonesia throughout the company's presence in Indonesia, the 10.64 percent stake in Freeport Indonesia could be worth between USD $1 billion and USD $2 billion. This implies that, if Freeport opts for an IPO, it would be the largest IPO ever on the IDX (surpassing the value of Adaro Energy's IPO in 2008). However, in order to determine the value of the 10.64 percent stake, a fundamental analysis is also required and given the sluggish global economy, particularly weak commodity prices, Freeport Indonesia's financial performance has been in decline over the past couple of years. As such, the company may have to offer the stake at a discounted price in order to attract enough investors to absorb all offered shares.
Freeport Indonesia's Financial Highlights:
in billion US dollar
¹ January-September period
Source: Freeport McMoran
IDX Chief Sulistio said that in case Freeport Indonesia opts for an IPO, the domestic investors only will be allowed to purchase the shares. He added that local corporate or individual investors in Papua should be prioritized.
By 2019, a 30 percent stake in Freeport Indonesia has to be owned by Indonesian parties. Although the existing contract of Freeport Indonesia to operate the Grasberg mine will expire in 2021 (and due to Indonesian law extension of the contract can only be officially decided upon in 2019), it is understood that the central government will allow a 20 year extension. Therefore, Freeport Indonesia has started to invest heavily in underground mining as well as smelting facilities.