* Rio CEO says could walk away from Grasberg interest
* Says to decide in "coming weeks and months"
* World's No.2 copper mine has faced string of problems (Changes sourcing; adds Freeport comment, detail)
By Fergus Jensen
JAKARTA, Feb 9 (Reuters) - Rio Tinto RIO.AX RIO.L is considering walking away from its interest in the huge Grasberg copper mine operated by Freeport McMoRan Inc FCX.N in Indonesia, the mining giant's chief executive told analysts late on Wednesday.
The world's No.2 copper mine is facing a stoppage in its copper concentrate exports and permit issues with the Indonesian government, which Freeport has warned could force it to slash production and its local workforce. strike at the country's biggest copper smelter, which is Freeport's sole domestic offtaker of copper concentrate, has added to its woes. is no doubt that Grasberg is a world-class resource. But the key question, especially in the light of what happened three weeks ago, is: is Grasberg a world-class business for us?" Rio CEO Jean-Sebastian Jacques said, according to a transcript of the analyst briefing.
"Everyone was taken by surprise," he said, referring to Indonesia's stoppage of copper exports from Grasberg on Jan. 12.
Rio will decide in "coming weeks and months" whether to sell or walk away from its option to take an effective 40 percent stake in Grasberg in 2021, he said.
A spokesman for Rio Tinto in Australia could not be reached for comment on Thursday.
Under a joint venture deal it inked with Freeport in 1995, Rio gets a 40 per cent share of Grasberg's production above specific levels until 2021, then 40 per cent of all production after 2021.
Freeport Indonesia spokesman Riza Pratama told reporters that amid the export stoppage, Grasberg's copper concentrate stockpile warehouse was now "almost full", indicating that a production cut would be imminent without a breakthrough.
He did not respond to written questions on Rio.