Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Wed, April 10 2013, 12:44 PM
Nickel miner PT Vale Indonesia, whose shares are traded on the bourse under the code INCO, is planning to spend up to US$216 million to support its business this year.
“In 2013, we plan to invest approximately $216 million to sustain investment, growth and project development,” Vale president director Nicolaas “Nico” Kanter stated in the company’s 2012 annual report.
The allocation is higher than the company’s spending last year of $147.5 million in capital expenditure plus $38.7 million for research and development.
According to the annual report, part of the company’s development this year is the upgrade of its electric Furnace 1 to a capacity of 90 megawatts (MW) and the construction of a new furnace with 90 MW capacity to help the company boost its production in the future.
In 2013, Nico said that his company would try to achieve a 10 percent increase in production. “This increase will positively impact productivity, dilute fixed costs and result in a better margin for the company.”
That percentage would see the company report 77,788 metric tons in nickel matte production this year, higher than last year’s production figure of 70,717 metric tons, which was almost 6 percent higher than
Vale’s production recovered in the last quarter of last year, thanks to the completion of the upgrade of electric Furnace 2 in May last year, which added an additional 15 MW capacity to its operations. The furnace upgrade resulted in Vale reporting the highest quarterly production volumes in its history of 21,306 metric tons.
Despite higher production, the company suffered from a drop of 26 percent in the selling price, leading to lower revenue and around an 80 percent drop in net profits.
Vale currently operates several areas mostly in Soroako in South Sulawesi, under a contract of work (CoW) with the government, which was signed in 1968. The CoW was most recently extended through to 2025 and, under the contract, Vale has around 190,000 hectares of total land area.
The government is working on contract renegotiations with a number of mining companies, including Vale, which was previously known as PT International Nickel Indonesia.
The renegotiations include six main points, namely an increase in royalty payments, local smelting of ore, use of local goods and services, divestment, contract extensions and the size of mining areas.
Nico said that the company would continue the renegotiation with the government to reach a conclusion within the first half of this year.
“A successful conclusion will be of significant strategic benefit to Indonesia, the government, Vale, its shareholders and community stakeholders, as it will trigger an additional investment of approximately $2 billion over the next five years,” he said.
The company is currently 58.73 percent owned by Vale Canada Limited, which is wholly owned by Barazil’s Vale SA.
Another big shareholder is Japanese Sumitomo Metal Mining Co., Ltd. with 20.09 percent, while the remaining shares are owned by the public.
Shares in Vale closed at Rp 2,400 (25 US cents) apiece on Tuesday, a decline of 2.04 percent from a day earlier. The company’s market capitalization reached Rp 23.85 trillion as of Tuesday