When Will Vale's Mining Contract End: Will Indonesia Take Over?

When Vale's Mining Contract Ends (ANTARA)

YOGYAKARTA - Talking about Vale's mine in Indonesia, of course, cannot be separated from the interference of foreign parties. Well, the question is, when will the vale mine contract end?

The contract of Karya (KK), a nickel mining company from Canada in Indonesia, PT Vale Indonesia Tbk (INCO), will end in 2025, to be precise December 28, 2025.

This Vale Work contract has experienced an extension once in January 1996. Vale's initial contract began in 1968. This means that Vale has been mining nickel for more than 50 years in Indonesia.

However, most of PT Vale Indonesia's shares are still owned by foreigners, namely Vale Canada Limited (VCL) 44, 3%, Sumitomo Metal Mining Co. Ltd ( SMM) 15%.

There are also pure shares of Indonesia "only" 20%, which is owned by Holding BUMN Mining MIND ID, while 20, 7% are public shares listed on the Indonesia Stock Exchange (IDX), so it is not certain that they are purely owned by Indonesia.

With this situation, members of the DPR take into account that it is appropriate for Vale's Contract to be returned to the country first.

Member of Commission VII DPR RI from the PKS faction, Mulyanto, urged that the mining concession area managed by PT Vale Indonesia Tbk (INCO) be returned to the state. Considering that the 11% share bonus takeover through MIND ID for him would not mean anything good for MIND ID or Indonesia.

The takeover of 11% of shares is adrift of Vale's debt to divest 51% of shares to Indonesia. Mainly, before the industry proposes an extension of the contract which will expire in 2025.

As data, Indonesia's share ownership in PT Vale Indonesia is currently only 40.7%, with details of 20.7% of them are shares owned by the public and 20% are owned by MIND ID.

"According to the Minerba Law, the share divestment is gradually for the national minimum of 51%. It should be returned to the state," Mulyanto told CNBC Indonesia, Friday (2/6/2023).

For Mulyanto, 51% of Indonesia's shares in PT Vale Indonesia should not include 20, 7% of which are owned by the public. The reason is, public share ownership of 20, 7% in PT Vale Indonesia is considered unclear and its origin and is not certain to be purely owned by Indonesian citizens.

"Not (not listed public shares). What is on the stock exchange is not clear," he said when asked if it meant that 51% of the shares belonged to the public listed on the stock exchange.

The same thing was expressed by the Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira. Bhima assessed that it was appropriate for the government not to extend the contract by PT Vale Indonesia Tbk (INCO) to shift it to a Special Mining Business License (IUPK).

Instead of being extended, the concession of PT Vale Indonesia's mining land should be returned to the state.

"It is better after the contract ends, it should be returned to the state only, compared to divestment with small state shares," said Bhima.

In addition, for him, with a mining concession that has been controlled by Vale, countries through SOEs can carry out operations without significant challenges. Thus, the results to the country will be much larger if managed alone.

"If the contract is extended, the fear of the nickel raw material chain for the needs of the battery industry in the country is difficult to fulfill," he said.

It is necessary to know that Vale has been struggling with plans to build a new nickel smelter for about a decade. Moreover, at least 3 new smelter projects with an estimated investment value of approximately IDR 140 trillion are predicted to be formed. But unfortunately, not yet one of the 3 projects operates.

These 3 projects include the Sorowako project worth US$ 2 billion, the Bahodopi project worth US$ 2.5 billion, and the Pomalaa project worth US$ 4, 5 billion.

Vale Indonesia's contract will expire on December 28, 2025, after the last Amendment and Extension Agreement was signed in January 1996.

But in October 2014 PT Vale and the Government of Indonesia agreed after the KK renegotiation and there were some conditions that changed, listed the mining area changing to 118.435 hectares.

Vale's first work contract has actually been signed since 1968. That is, Vale has been mining nickel for more than 50 years in Indonesia.

However, until now Vale's shares are mostly still owned by foreigners, namely Vale Canada Limited (VCL) 44, 3%, Sumitomo Metal Mining Cp. Ltd( SMM) 15%, then MIND ID 20%, and the public 20, 7%.

The entry of MIND ID as a shareholder of 20% at PT Vale Indonesia formally took place in 2020, precisely when the Sale and Purchase Agreement was signed on June 19, 2020.

MIND ID must check IDR 5, 52 trillion or IDR 2, 780 per share for the acquisition of 20% of PT Vale Indonesia's shares from VCL and SMM. From Vale's 20% divestment, it was 14,9% of the previous shares belonged to VCL, and 5, 1% belonged to SMM.

So after knowing when the vale mine contract will end, see other interesting news on VOI, it's time to revolutionize news!