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Provincial leaders scramble to get Vale’s nickel shares
The government cannot simply take over the INCO mine and its smelting industry if its CoW is not extended because the investors have the right to take back or sell all the mining equipment and all other fixed assets, except the mineral resources underground.
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Hot topic: A furnace operates at the nickel smelting facility belonging to PT VDNI on the Morosi industrial estate in Konawe, Southeast Sulawesi on Sept. 9, 2022. The company processes nickel to produce stainless steel. ( Antara/Jojon)
T
he manner in which the government handles the contract of work (CoW) of publicly traded PT Vale Indonesia, the country’s oldest and largest nickel company, will have a significant impact on Indonesia’s lofty ambitions to become a major production base for electric vehicles and car batteries.
The governors of Central, South and Southeast Sulawesi provinces, have launched a political campaign to acquire the shares of Vale Canada Ltd. and Sumitomo Metal Mining in PT Vale Indonesia, which is listed as INCO on the Indonesian stock exchange (IDX).
The three governors have lobbied the House of Representatives to block the extension of INCO’s 1996 CoW, which will end on Dec.28, 2025, arguing that the company has not contributed much to local people in terms of revenues, employment and other economic benefits.
In view of the presidential election in mid-February, 2024, whereby the sentiment of natural-resource nationalism usually raises its ugly head, INCO’s 1996 CoW, which was an extension of its 1968 CoW, could become a highly political issue. The 1996 CoW itself was amended by then-president Susilo Bambang Yudhoyono on Oct. 17, 2014, only three days before he was replaced by newly elected Joko “Jokowi” Widodo.
The 2014 amended CoW stipulates, among other things, that INCO is required to reduce its areas of mining operations from 190,435 hectares to 118,435 ha, pay a royalty of 2 percent of sales, escalating to 3 percent with increased nickel prices. INCO is also required to divest a further 20 percent of its shares to Indonesian stakeholders.
The 2020 Mining Law stipulates that a CoW, which has received its first extension, shall be guaranteed a second extension in the form of a Special Mining Business License (IUPK) for continuation of operations for a maximum of 10 years after the expiry of the first extension.
But a company operating with an IUPK should be controlled by Indonesian interests (shareholders).
