The government of Indonesia and PT Vale Indonesia signed an amendment to Vale’s Contract of Work (CoW) on October 17, marking the conclusion of a renegotiation process required by Indonesia’s 2009 Mining Law. The amendment includes a requirement for PT Vale to divest a further 20% of its shares to Indonesian participants. This is consistent with a government requirement that 40% of shares of integrated mining and processing companies be held by Indonesian participants and recognizes that 20% of PT Vale’s shares are currently owned by public floating shareholders through the Indonesia Stock Exchange. The process of divestment will be conducted within five years.
Sumitomo Metal Mining holds an approximate 20% interest in PT Vale.
The amended CoW includes an agreed royalty rate of 2% of sales, escalating to 3% at increased nickel prices, which is aligned with the royalty structure of the government regulation.
The amended CoW also provides for an immediate reduction in the size of PT Vale’s total CoW area from the current 190,510 ha to 118,435 ha. At the expiry of the CoW on December 28, 2025, the company will maintain 25,000 ha as ore zones that the company proposes to exploit. In addition to the ore zones, the company can retain areas required to support its operations and other needs. This represents a renegotiated land package that is sufficient to support PT Vale’s investments and long-term growth plans.
PT Vale can submit a request to continue its operations beyond CoW expiry for a 2- x 10-year period, in the form of an operating license, subject to government approval. The government approval will consider the company’s fulfillment of its requirements under the CoW amendment.
“PT Vale believes that with this amendment, the company is well-positioned to contribute to the development of Indonesia and continue to create shareholder value. The company extends its appreciation to the government of Indonesia for its valuable support and trust,” the PT Vale statement said.
PT Vale produces about 75,000 mt/y of nickel in matte from lateritic ores at integrated mining and processing facilities near Sorowako on the island of Sulawesi. Its entire production is sold in U.S. dollars under long-term contracts for refining in Japan.
