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akarta-listed nickel miner PT Vale Indonesia and the Energy and Mineral Resources Ministry have signed a memorandum of understanding (MoU) on proposed changes to the mining company'€™s contract of work (CoW), a senior ministry official has said.

In the MoU both the ministry and Vale agreed to further discuss the details of the amendments to the company'€™s CoW, the ministry'€™s minerals and coal director general, R. Sukhyar, said on Friday.

'€œThe company has agreed to six issues in the CoW renegotiations, including higher royalties of 2 percent from the previous 0.9 percent. It also agrees that the royalties will rise to 3 percent if the nickel price reaches US$21,000 [per ton],'€ Sukhyar said, adding that the agreement had been signed last month.

Vale Indonesia president director Nicolaas D. '€œNico'€ Kanter said late last week that the company expected to seal the amendments to its CoW before the new government took office. '€œI note the government'€™s willingness to finish it during the current Cabinet'€™s term,'€ Nico said.

He added that details on the royalty adjustment would be discussed when drafting the amended CoW and the company had no objection to the government'€™s proposal.

Vale Indonesia, whose shares are listed on the Indonesia Stock Exchange (IDX) under the code INCO, is planning new investments amounting to around $4 billion, a plan that is dependant on agreement to the amendments.

Nico said the company would also ensure that with the amended contract it would still be able to get a fair return from the billions of dollars it had invested. '€œThis is what we'€™re also asking of the government that we be given time to ensure our return on investment. This is up to the government and we are sure that it will make an appropriate and reasonable decision,'€ Nico said.

Under the current CoW, Vale Indonesia is permitted to operate in Indonesia until 2025.

Vale'€™s MoU comes on the heels of a recent agreement signed by copper miner PT Freeport Indonesia. The agreements with Vale and Freeport are major developments in the government'€™s attempts to renegotiate a number of CoWs. Previously the ministry was only able to sign deals with smaller sized mining firms.

The renegotiations follow the implementation of the 2009 Mining Law, which stipulated that all CoWs both for minerals and coal '€” known as PKP2B or CCoW '€” be amended.

The renegotiation was supposed to be completed a year after the law was passed. However, negotiations were hampered by the complexity of the six issues being discussed, which are adjustment in revenue to the state, mining size, continuity of operation after contract expiry, divestment, an obligation for domestic processing as well as obligations to use local goods and services.

Last March, the ministry signed MoUs with 25 mineral and coal miners. None of them was as big as Vale or Freeport, which have extensive mining areas and long contracts.

The government has to renegotiate 107 CoWs and CCoWs. '€œAs of now, we have MoUs with eight CoW holders and 19 CCoW holders. There are also 14 CCoW holders ready to sign MoUs,'€ the mineral and coal office secretary, Paul Lubis, said.

Sukhyar said the mineral and coal directorate general was also working on renegotiation with another nickel miner, PT Weda Bay Nickel. However, a dispute over royalties had stymied the talks.

'€œThe company'€™s royalty is now 2 percent. It wants the percentage to remain unchanged until it achieves a return [on its investment],'€ Sukhyar said.

Weda Bay is currently still at the exploration stage and has yet to begin production.