Freeport’s Indonesia Deal: So Near, yet So Far



Freeport’s Indonesia deal

Freeport-McMoRan (FCX) and the Indonesian government are discussing the fine print of extending the company’s mining license in the country beyond 2021.

Recent news flows

Citing people familiar with the proposal, Bloomberg reported last week that “Indonesia and Freeport-McMoRan Inc. may sign a new agreement as soon as this weekend that will lay out a road-map for the transfer of majority ownership of the giant Grasberg mine to a local firm.” However, according to Reuters, citing an unnamed government official, Rio Tinto (RIO) (TRQ), which is the minority partner in Freeport’s Indonesia operations, “is not expected until 2022 to relinquish its interest in the giant Grasberg copper mine in Indonesia operated by the local unit of Freeport McMoRan.”

A long-impending issue

In August, Freeport complied with the Indonesian government’s key demands by agreeing to set up a smelter in the country and divest its majority stake in Indonesian operations toward Indonesian interests (EIDO). However, the two sides have yet to find common ground in some respects, especially in terms of valuation.

Nonetheless, after waiting on the sidelines for most of 2017, some analysts seem to be warming up to Freeport. Last week, Morgan Stanley upgraded Freeport from “underweight” to “equal weight” while raising its target price for the stock from $10 to $14. You can read Which Copper Miner Is Wall Street Betting On in 2018? to analyze how analysts are rating leading copper miners (TECK).

To sum it up, higher copper prices, analyst upgrades, and positive news flow about its Indonesian operations lifted Freeport stock last week.

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