T

he Energy and Mineral Resources Ministry and nickel miner PT Vale Indonesia are still hammering out issues relating to Vale'€™s contract renegotiation.

The ministry'€™s director general for minerals and coal, R. Sukhyar, recently said Vale had agreed to return around 83,000 hectares (ha) of its concession area to the government.

However, he said, both parties were still negotiating to accommodate requests by the local administration regarding the utilization of areas that had not been mined or explored. These areas have been left idle.

A meeting attended by several governors and regents of areas where Vale holds concessions was held last week.

According to Sukhyar, local administrations were seeking assurance that Vale'€™s activities would benefit the regions.

'€œIt'€™s important to know Vale'€™s future plans. If they conflict with governors and regents'€™ plans, we have to settle. In the future, if none of the plans are realized, Vale'€™s operation can be reviewed,'€ Sukhyar said.

The government is currently working on mining contract renegotiation as mandated under the 2009 Mining Law.

The renegotiation centers on six points: adjustment in royalty; divestment; mining size; obligation of processing and refining in domestic facilities; contract extension; and utilization of local goods and services.

Under its existing contract, Vale has the right to develop 190,150 ha of land in Sulawesi. The 2009 Mining Law, however, stipulates that a metal miner is only allowed to develop 100,000 hectares.

Vale'€™s contract of work was issued on July 27, 1968 and was supposed to expire March 31, 2008. Vale Indonesia and the government agreed on Jan. 15, 1996 to modify the contract and it was extended until 2025.

Vale president director Nicolaas '€œNico'€ Kanter could not be reached for comment on Monday. He had previously said that his company planned further investment of up to US$4 billion.

According to Vale'€™s 2013 annual report, the company is planning to spend around US$2 billion in the first phase of investment, which will last for the next five years.

Its annual report said that the investment will include development projects worth approximately $1.5 billion in South Sulawesi and $500 million in Central Sulawesi.

Nico said that the ministry had, in principle, accepted the company'€™s development plan in South Sulawesi while works in Central Sulawesi remained in consideration.

Apart from development in the two areas, Vale is also planning another $2 billion project in Southeast Sulawesi.

Director for minerals at the ministry'€™s directorate general, Dede Suhendra, said that local administrations had also asked Vale to speed up its investment plans, as the company had only developed 10 percent of the concession'€™s total area.

Shares in Vale, which are traded on the Indonesia Stock Exchange (IDX) under the code INCO, were closed at Rp 3,855 ($ 0,32 ) on Monday, falling by 1.28 percent compared to a day earlier.