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Analysis: MIND ID to gain majority stake at Vale to drive Nickel downstreaming
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Workers operate a tool to break limestone into small pieces in the Klapanunggal limestone hill - Bogor Regency, West Java (Friday, December 3, 2021). Even though they are assisted by small machines, they prefer to work manually. (JP/P.J.LEO)
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n another move of resource nationalism, the government through mining holding company MIND ID plans to acquire majority stake in the country’s largest nickel miner PT Vale Indonesia (INCO) in a bid to speed up the downstreaming of nickel industry in the country.
MIND ID currently owns 20 percent of INCO and plans to purchase another 14 percent stake to make it the largest shareholder of the company. Currently, Vale Canada Limited holds the largest stake with 43.79 percent, Sumitomo Metal Mining Co. Ltd. holds 15.03 percent and the investing public owns the remaining 20.49 percent.
Having a controling stake at Vale serves as a strategic move for MIND ID to control supplies of nickel, the main raw material for stainless steels and batteries for electric vehicles (EVs), as the government has ambitions for Indonesia to take on a major role in the global supply chain, from the upstream to the downstream, including manufacturing EV batteries in the country.
To support its ambition, the government has slapped an export ban on nickel, which prompted the European Union to challenge it at the World Trade Organization. But the government seems unfazed and has taken various measures to speed up the nickel downstreaming process by developing smelters.
The government has apparently been dissappointed with INCO’s slow progress in developing its three promised smelters. The three smelters would be developed in Sorowako with investment of US$2 billion, in Bahodopi with $2.5 billion, both in South Sulawesi, and Pomalaa, Central Sulawesi, with $4.5 billion. No significant progress has been reported.
The government apparently wants to repeat its success in acquiring the majority stake in the country’s largest copper and gold miner Freeport Indonesia, after which the government forces Freeport to speed up the development of its $2.8 billion smelter in Gresik, East Java. Freeport had actually been reluctant to build the smelter arguing that investing in smelters did not bring good margins.
With Vale, the government currently has a good bargaining position as the company’s contract of work is due to expire by the end of December 2025. To get an extension, the contract of work needs to be changed into a special mining business permit (IUPK), under which Vale Indonesia needs to divest 51 percent of its shares to Indonesian shareholders, such as the central government, regional governments, state-owned enterprises (SOEs), region-owned enterprises (BUMD) and the private sector.
