JAKARTA, Jan 20 (Reuters) - Indonesia will reach a decision on whether to accept Freeport McMoRan Inc’s $1.7 billion divestment price for its unit in the country by the end of the first quarter, a mines ministry official said on Wednesday.

Under agreements reached in 2014, the U.S. mining giant must sell the government a greater share of the Grasberg copper and gold mine in Papua and invest in domestic processing to win an extension of its contract beyond 2021.

Earlier this week, State-owned Enterprises Minister Rini Soemarno said Freeport was asking the government to pay too much for an additional 10.46 percent stake.

A team of official from different ministries will be formed to evaluate Freeport’s offer and negotiate with the company, Bambang Gatot, the mines ministry’s director general of coal and minerals told a parliamentary committee, with a final verdict due in March.

“If the government will buy it, it should consult with parliament first,” said Gatot, adding that the stake could go to the central or regional governments, a state-owned enterprise or a private company.

RBC Capital Markets analyst Fraser Phillips in a recent note valued Freeport’s current 90.64 percent Grasberg stake at $8.2 billion, with the asset’s full valuation at $9 billion. Other analysts may have different valuations.

The divestment price is based on the right to mine beyond 2021 and future investment needed, Clementino Lamury, director and executive vice-president at Freeport Indonesia told the committee.

Freeport, whose current contract ends in 2021, wants to invest $18 billion to expand its operations, including underground mining, at one of the world’s largest copper mines, but is seeking government assurances first that it will get an extension.

Consulting parliament on the divestment offer could potentially slow the process further.

Freeport’s local CEO Maroef Sjamsoeddin resigned for personal reasons on Monday, just weeks after the company became entangled in an alleged extortion scandal that upset powerful figures inside and outside the government.

Sjamsoeddin said he had secretly recorded a meeting with the parliament speaker, with his handling of the situation coming under criticism from both government and industry officials.

The scandal came at a delicate time, with both sides working together towards a deal.

Freeport’s Jakarta-friendly co-founder James “Jim Bob” Moffett also resigned as the company’s chairman last month, and his departure is seen as a blow to contract talks.

“Moffett is a great negotiator,” said a source with close connections to the Phoenix, Arizona-based company. “People feel much more comfortable dealing with him.”

Delays resolving the issue could lead to a gradual reduction in copper output as open-pit mining depletes and could be supportive for copper prices and hurt Indonesian government revenues. (Additional reporting by Melanie Burton in Melbourne and Nicole Mordant in Vancouver; Reporting by Wilda Asmarini and Michael Taylor; Editing by Ed Davies)