Vale to lower stake in Indonesian mining unit to extend operations

19 October 2014 (Last Updated October 19th, 2014 18:30)

Brazilian mining giant Vale's Indonesian subsidiary PT Vale Indonesia has signed a Contract of Work (CoW) with the Indonesian Government to extend its operations in the country to 2045.

Brazilian mining giant Vale's Indonesian subsidiary PT Vale Indonesia has signed a Contract of Work (CoW) with the Indonesian Government to extend its operations in the country to 2045.

The contract is an amendment to the original agreement signed in 1996, which was scheduled to terminate on 28 December 2025.

As part of the CoW, Vale will reduce its mining area from the current 190,510ha to 118,435ha. After the CoW expires, Vale will maintain 25,000ha as ore zones.

"Vale has agreed to sell 20% of its shares to Indonesian shareholders and will pay the government an increased royalty of 3%." 

With the aim of extending its contract in the country, Vale has agreed to sell 20% of its shares to Indonesian shareholders and will pay the government an increased royalty of 3%, dependent on the price of nickel.

The company had been paying a royalty of 0.63% on nickel revenues from 2010 to 2013.

PT Vale Indonesia said in a statement: "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."

Vale currently owns a 59.3% stake in PT Vale Indonesia, with the remaining shares owned by Japan's Sumitomo Metal Mining and the Indonesian public, reported The Walls Street Journal.

As per the latest agreement, Vale will own 80% of PT Vale's nickel production, which stood at 37,600t in the first half of this year and accounted for 29% of Vale's total nickel production.

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