Vale’s projects on hold pending renegotiation

Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Wed, November 27 2013, 11:44 AM

Jakarta-listed PT Vale Indonesia is expecting to wrap up the renegotiation of its contracts of work (COWS) with the government soon so that the company can move forward with its billion dollar projects.

Earlier, the nickel producer said it planned to invest US$2 billion over five years as part of its development projects in Indonesia. The investment will include the expansion of the company’s operations in Sorowako, South Sulawesi, and commencement of operations in Bahodopi, Central Sulawesi.

“The plan depends on [the outcome of] our renegotiation with the government. If there are no
concrete results from the renegotiation, we cannot carry out the investment,” Vale Indonesia president director Nicolaas Kanter said on Tuesday.

Among the issues raised during the renegotiation was the size of the mining areas. Under its current contract, Vale Indonesia has the right to develop 190,150 hectares of land in Sulawesi. The 2009 Mining Law, however, stipulates that a metal miner is only allowed to develop 100,000 hectares.

The government has said that it would continue to respect COWS, but some points had to be adjusted.

Other issues on the table for discussion were contract extensions, the amount of royalties, obligations to process raw materials domestically, divestment and the utilization of local goods and services.

All mineral and coal mining contracts are required to comply with the 2009 Mining Law.

“[So far] the follow up from the government is good. We have had four or five meetings with the Energy and Mineral Resources Ministry this month. We have shared ideas on size, royalties, divestment and local utilization. But, more details are needed,” Nicolaas said.

Vale Indonesia got a contract of work on July 27, 1968, which was supposed to expire on March 31, 2008. Vale Indonesia and the government agreed on Jan. 15, 1996 to modify the contract and had it extended until 2025.

Despite discords over the size of the mining site, Nicolaas said that Vale had proposed to maintain its land at 120,000 hectares to help the company continue its growth and long term investment plan.

So far, he said the company and the government were working out the details of the issue including the future of the planned projects.

“Our development plan in South Sulawesi has been accepted in principle. We’re still working for development in Central and Southeast Sulawesi. The planned $2 billion investment is for development projects in South and Central Sulawesi. We have another plan with Sumitomo in Southeast Sulawesi, which is another $2 billion,” Nicolaas said.

Earlier this year, Japanese Sumitomo Metal Mining Co., Ltd., announced that it had carried out a feasibility study with Vale Indonesia for the construction of a nickel processing plant in Southeast Sulawesi. The plant will recover nickel and cobalt from low-grade nickel oxide ores.

Earlier this month, the government claimed that it made significant progress in negotiations with miners. It also expects that the negotiations will be wrapped up before the year end.

“The renegotiation [of the contracts] must be completed [this year],” Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said in a text message, responding to uncertainty on whether the renegotiation process could be completed this year.

http://www.thejakartapost.com/news/2013/11/27/vale-s-projects-hold-pending-renegotiation.html

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