The Indonesian government, State-owned mining holding company MIND ID and a subsidiary of Brazilian mining company Vale, PT Vale Indonesia, are scheduled to sign a deal on divestment share’s price and extension of mining business permit today, February 26, 2024.
“Hopefully, there are no obstacle to the plan this afternoon, please monitor MIND ID,” Spokesman of the Energy and Mineral Resources Ministry (ESDM), Agus Cahyono Adi, said on Monday, February 26, 2024.
ESDM Secretary-General Dadan Kusdiana said on Friday, February 23, 2024 that based on the information from ESDM Minister Arifin Tasrif, the ESDM, Vale Indonesia and MIND ID have achieved a deal on divestment share price. ” I know there has been a deal. The minister has already conveyed the indication of the price,” Dadan said.
Previously, Arifin said the price of the divestment share is lower than Vale’s shares price in the Indonesian stock market on Friday, which was at Rp 3,890 (25 U.S. cents) per share. The average price of Vale’s share is Rp 4,600 (29 U.S. cents) per share in the last three months.
Divestment of Vale Indonesia’s shares is required as one of the conditions so that the extension of its mining contract to a Special Mining Business Licence (IUPK) can be carried out. PT Vale Indonesia’s Contract of Work will expire in December 2025.
Indonesia’s ownership in PT Vale Indonesia (INCO), among others through MIND ID, is 20 percent and another 21.18 percent is spread across the Indonesian stock market. This implies that in the case of the supplementary shares amounted to only 14 percent, MIND ID will possess a 34 percent stake in Vale’s shares.
Currently, Vale Canada Limited (VCL) retains the majority stake in INCO with 43.79 percent of shares, followed by Sumitomo Metal Mining Co. Ltd (SMM) which holds a significant portion at 15.03 percent.
Dadan said the divestment of Vale Indonesia share is a mandate of coal and mineral law. At the same time the government wants to ensure that the government program on the development of downstraem industry can be implemented well as stipulated by the law. ” Mind ID , or whoever appointed to run the company has to ensure that Vale work program can be continued and maintained for the development of downstream industry,” he said.
Obscuration
Former Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources Dr Simon Felix Sembiring, dismissed the allegation of obscuration in Vale’s ownership. He said on Monday, February 26, 2024, that there had been obscuration by observers and unscrupulous officials that with 34 percent of PT Mind ID’s shares in PT Vale Indonesia, MIND ID can be the majority shareholder and could fully control PT Vale Indonesia.
“There are 21 percent of PT Vale Indonesia’s shares in Indonesia Stock Exchange, which can be owned by foreigners, both by shareholders in Vale and other foreigners. So in the shareholders meeting, Mind ID, which owns 31 percent of the shares, is not automatically in the majority to make decisions. The 21 percent of shares in Indonesia Stock Exchange can also be owned by foreign individuals or foreign companies in PT Vale Indonesia,” Simon said in a statement.
Simon further said that MIND ID’s 34 percent composition in Vale is a pseudo-majority.
“Of the remaining 66 percent, 21 percent is in Indonesia Stock Exchange, which could be owned by foreigners, and Indonesian nationalities, and the remaining 45 percent is still foreign, namely Vale Canada Limited (VCL) and Sumitomo Metal Mining Co Ltd (SMM) of Japan. That is the mistake. The Board of Directors is decided at the shareholders meeting, if Mind ID’s proposal to place its people is not approved by other shareholders, can they insist? That’s why if you want to tell information to the public, you have to be honest, not camouflaged,” said Simon.
Simon then emphasised that although as a single entity shareholder, Mind ID is indeed the majority, but not the majority to control PT Vale Indonesia.
No need to extend
Looking at the existence of PT Vale Indonesia, Simon Sembiring, who is none other than the drafter of the 2009 Mineral and Coal Law, revealed that PT Vale Indonesia’s Contract of Work which expires on 28 December 2025 does not need to be extended.
“Furthermore, the former Vale contract of work’s area is returned to the state to be managed by state owned enterprises . In accordance with the contents of the contract of work, if the government does not extend, the contract of works becomes a special mining business pemit (IUPK) at this time, then the Company should offer first to the Government. If the government refuses, for example if the price is not suitable, then the company is given the opportunity to transfer its assets to other parties within six months. If this is not done, then the assets become the property of the state,” Simon explained.
Therefore, Simon said, the government is at an advantage. The company is also obliged to rehabilitate all environmental damage that occurs and becomes the company’s liability. “If the government acts according to the content of the contract of work, why is the investment climate feared to be worsened? If we fulfil the content of the contract of work, the investment climate should improve,” said Simon.
Simon further said that the funds from Mind ID’s 30 percent divestment of Vale shares were used to pay for Vale’s assets. It is useless to divest 30 percent of shares because it is not the majority, Mind ID is only passively waiting for dividends.
Simon said that the country does not need to worry about the investment climate being disrupted by not extending Vale’s contract of work. “We can lose football to Brazil, Vale belongs to Brazil, but not the ability to manage a mine,” Simon concluded.
