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Vale Indonesia, government sign amendment of Contract of Work

JAKARTA (Rambu Energy) – The Indonesian government and PT Vale Indonesia Tbk (INCO.IJ) on Friday signed an amendment of the Contract of Work (CoW), marking the conclusion of the long-renegotiation process. The amendement is made to adjust with the 2009 Mining Law.

The government was represented by the Coordinating Minister for the Economy and acting Minister of Energy and Mineral Resources Chairul Tanjung. PT Vale, previously known as PT Inco, was represented by the company’s President Director and CEO, Nico Kanter and CFO Febriany Eddy.

The energy Vice Minister Susilo Siswoutomo and Director General of Mineral and Coal R. Sukhyar and Executive Director of Vale, Base Metals, Peter Poppinga witnessed the signing.

Under the amended CoW, Vale agreed to reduce the size of its total CoW area from the current 190,510 hectares to 118,435 hectares. At the expiry of the CoW on Dec. 28, 2025, the company will maintain 25,000 hectares 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,” Vale said in a statement.

Vale also agrees to a royalty of 2 percent of sales (escalating to 3 percent at increased nickel prices) that is aligned with the royalty structure of the government regulations. This, Vale said, reflects an evolution of market dynamics.

On divestment issue, Vale agreed to divest a further 20 percent of the company’s shares to Indonesian participants. This is consistent with the government requirement for an integrated an processing companies that 40 percent of shares be held by the Indonesian participants and recognizes 20 percent of PT Vale shares are currently owned by public floating shareholders through the Indonesian Stock Exchange.

The divestment will be conducted within five years, it said.

The other point is that PT Vale is allowed to submit a request to continue its operations beyond CoW expiry for a 2×10-year period, in the form of an operating license.

“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,” it said. (*)


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