RTZ-CRA (RTZ-N) has gained a foothold in the Block A gold operations of Freeport-McMoRan Copper & Gold (FCX-N) in Irian Jaya, Indonesia.
The deal calls for the former to acquire a 40% interest in production above 118,000 tonnes per day.
Freeport’s subsidiary, PT Freeport Indonesia (PT-FI), currently produces 125,000 tonnes per day from the Grasberg-Ertsberg deposit and other high-grade zones.
RTZ-CRA will lend the subsidiary up to US$450 million to cover the cost of expanding its mill to 190,000-200,000 tonnes per day. Until the expansion is complete, Freeport will retain 100% of cash flow up to 118,000 tonnes per day, and, once production is expanded, RTZ-CRA will receive 100% of cash flow above 118,000 tonnes per day until it recoups the loan. Upon repayment, PT-FI will receive 60% of cash flow generated from production, while RTZ-CRA will receive 40%.
The expansion, which includes a US$300-million coal-fired power plant and related facilities, is expected to cost US$960 million.
In addition, RTZ-CRA has fulfilled its US$100-million exploration obligation, and future expenditures incurred by the companies will be split 60-40. Under the joint-venture deal, RTZ-CRA has thus far spent US$184 million on exploration and expansion.