After years of negotiation, the US mining company agreed in August to reduce its ownership in PT Freeport Indonesia, which operates the Grasberg copper and gold mine in the country's easternmost province of Papua, to 49% from 90.64% now.
Indonesia and Freeport agreed in principle in August to set up Freeport's rights to Grasberg according to a new mine licence that replaces an existing contract of work.
Inalum said Friday it was grabbing a 41.64% stake in the local unit of Freeport, which increases its current ownership in it to 51%.
Under the agreement signed on Friday, the Papua provincial government and Mimika regency will jointly own rights to a 10 per cent share in PT Freeport Indonesia (PTFI) once they have been divested, Finance Minister Sri Mulyani Indrawati said at a press briefing.
"The government hopes to improve the performance of PTFI and give maximum benefits to the Papuan and Indonesian people", Ms Indrawati said.
"The agreement signed today is a strategic step forward in efforts to acquire shares divested by PTFI", it said.
A Freeport Indonesia spokesman, Napoleon Sawai, said last month that Jakarta values the stake at $4 billion, while the US company values it between $12 billion and $13 billion.
Budi Gunadi Sadikin, Inalum's chief executive, said the company will raise funds for the acquisition, but didn't elaborate.
"As of December 2017, PTFI's realized exports stood at only 921,137 tons", the Energy and Mineral Resources Ministry's mineral and coal director general Bambang Gatot Ariyono said on Thursday.
Freeport's divestment may involve liquidation of a joint venture that Freeport Indonesia, operator of Grasberg, formed with Rio Tinto in 1996.
A Melbourne-based spokesman for Rio declined to comment.