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Jakarta Post

Govt finalizes plan on Vale’s mandatory divestment

  • Stefanno Reinard Sulaiman

    The Jakarta Post

Jakarta   /   Tue, July 30, 2019   /   02:39 pm
Govt finalizes plan on Vale’s mandatory divestment Workers monitor a mining area of nickel producer PT Vale Indonesia. The government and Vale are finalizing the evaluation of the nickel mining company ahead of a mandatory divestment. (KONTAN/Cheppy A Muchlis)

The Energy and Mineral Resources Ministry and publicly listed nickel miner PT Vale Indonesia Tbk (INCO) are finalizing the valuation of shares of the nickel mining company that are to be sold to Indonesian investors as part of a mandatory divestment plan.

The ministry’s director for minerals, Yunus Saefulhak, said in Jakarta on Monday that the government and Vale were still in discussions over the nickel producer’s weighted average cost of capital (WACC), which could become a discount factor for the valuation of its shares.

He said a high WACC would produce a greater discount of Vale’s valuation, which would benefit the government.

Based on its contract of work that was amended in 2014, Vale’s owners are required to divest 40 percent of the company to Indonesian shareholders. They have sold 20 percent of the shares through the Indonesian Stock Exchange. The deadline for the divestment of the remaining 20 percent is October this year.

According to the regulation, the central or local governments have the privilege to buy the shares. If they are not interested, the right to buy the shares goes to state-owned companies and private companies.

Yunus further said the valuation was based on two schemes, namely a discounted cash flow over the firm’s benefits for the economy during the divestment deadline until the end of its mining contract and through market data benchmarking.

“Any method we use should prioritize how it would benefit the country,” he said, adding that the deadline for the valuation was August.

The ministry will submit the evaluation to the Finance Ministry and the State-owned Enterprises (SOE) Ministry before making a final decision on whether the state should buy the 20 percent stake in Vale or not.

Vale, one of the major nickel producers in the country, plans to produce between 70,000 tons and 72,000 tons in matte this year. (hen)