Vale Canada (VCL) and Sumitomo Metal Mining (SMM) have entered a heads of agreement to divest a 14% stake in Indonesia’s PT Vale Indonesia (PTVI) to PT Mineral Industri Indonesia (MIND ID).

Earlier, VCL, SMM and MIND ID held 44.3%, 15% and 20% stakes in PTVI, respectively.

With the agreement, the stakes of VCL and SNM will come down to 33.9% and 11.5%, respectively, while MIND ID’s stake will increase from 20% to 34%.

Upon deal closing, MIND ID will become the largest shareholder in PTVI.

After this deal, VCL said it would maintain significant economic exposure with the non-controlling interest while providing a governing influence through the board of commissioners.

Vale CEO and Vale Base Metals board director Eduardo Bartolomeo said: “We are proud to continue supporting Indonesia’s ambitions in delivering low-carbon metals that are essential for the global energy transition. PTVI’s high-quality project portfolio, including Bahodopi, Sorowako and Pomalaa, will drive the next stage of growth in responsible nickel production, creating long-term value for all stakeholders.

“This reinforces our long-standing commitment to prosperity, sustainability and local empowerment in Indonesia.”

With PTVI’s joint management structure, the three companies can now work together to not only support its future development but also the government’s plan for optimum use of national nickel reserves and resources. It can also increase value addition to the nickel value chain in the domestic market.

According to MIND ID, the divestment process is expected to be completed next year.

Once completed, the state-owned company plans to bring a positive impact and encourage advancements in the country’s mining sector.

MIND ID president director Hendi Prio Santoso said: “By becoming the biggest shareholder of PT Vale Indonesia Tbk, MIND ID, and VCL, will have more joint control in the operations of the company and also in managing and developing the company in the future.”

The sale was announced by the Indonesian Minister for Energy and Mineral Resources, Arifin Tasrif, last week.

It complies with an Indonesian law that requires foreign companies to sell 51% of their stake in local businesses after operating for a certain period.

The divestment is a requirement for foreign businesses to extend their operating permit in Indonesia, and Vale’s current contract will end in 2025.