Rio Tinto, PT Indonesia Asahan Aluminium (Inalum), and Freeport McMoran Inc. (FCX) have signed a non-binding agreement relating to the future ownership of the Grasberg mine in Indonesia. Under the terms of the agreement, Inalum will acquire all of Rio Tinto’s interests associated with its joint venture with PT Freeport Indonesia (PT-FI) and 100% of FCX’s interests in PT Indocopper Investama (PT-II), which owns 9.36% of PT-FI, for $3.85 billion. At closing, Rio Tinto will receive $3.5 billion, and FCX will receive $350 million, in cash proceeds from Inalum.

All parties have committed to work toward agreeing and signing binding agreements before the end of the second half of 2018.

Following completion of the transaction, Inalum will own 51% of PT-FI, and FCX will own 49%.

“This agreement marks a significant milestone toward establishing a new long-term partnership with the Republic of Indonesia to provide long-term stability for PT Freeport Indonesia’s operations,” Richard C. Adkerson, vice chairman of the board, president and chief executive officer, said. “Through this transaction, the government will achieve its ownership objectives in a manner that preserves the long-term value for FCX shareholders and the people of Indonesia through 2041.”

The transaction is subject to the negotiation and documentation of definitive agreements, including purchase and sale agreements, the extension and stability of PT-FI’s long-term mining rights through 2041 in a form acceptable to FCX and Inalum, a shareholders’ agreement between FCX and Inalum providing for continuity of FCX’s management of PT-FI’s operations, and resolution of environmental regulatory matters satisfactory to the Indonesian government, FCX and Inalum.

Recently, the Indonesia government extended the special mining permit to PT Freeport Indonesia (PT-FI) until July 31, which will allow it to operate the Grasberg mine.