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The non-binding agreement signals Rio Tinto’s long-awaited exit from the world’s second largest copper mine.

Grasberg is owned by Freeport McMoran, which holds a 90.64 per cent stake in the operation. The remaining 9.36 per cent share owned by the Indonesian Government.

Rio Tinto’s interest in the mine, through a participation agreement signed in 1996, is for 40 per cent of production above a pre-agreed level and 40 per cent of all production after 2022.

In 2017, Rio Tinto’s share of the 468,000t produced at Grasberg was 5700t.

The deal also involves a proposed transaction between Freeport and Inalum for the state-owned company to buy an additional stake in Grasberg, as well as additional terms related to the future ownership and operation of the mine.

All parties have committed to work towards agreeing and signing binding agreements before the end of the second half of 2018,” Rio Tinto said in a statement.

Given the terms that remain to be agreed, there is no certainty that a transaction will be completed. Any final agreements will be subject to approval by the necessary government regulators and authorities.”

Grasberg, which is in the Papua province of Indonesia, is recognised as one of the world’s largest copper-gold mines in terms of reserves and production.