Wednesday, May 29, 2024

ESDM minister defends Vale Indonesia’s contract extension

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Gusty da Costa




Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif has defended that the granting of permit extension for PT Vale Indonesia’s contract of work and its conversion into special mining business permit (IUPK) until 2035 is meant to give certainty for raw materials availibility for downstream industry. 

“As the resul of limited meeting on November 8, 2023, it needed an acceleration of the extension process of PT Vale Indonesia and converts it into special mining business permit by using a third party service to evaluate the share price of the company before divestment. The valuation was carried out based on fair market price without calculating the company’s reserves,” Arifin told a hearing with the House of Representatives’ (DPR) Mining and Industry Commision VII on Wednesdy, April 3, 2024. 

He said the extension and conversion of contract of works into special mining business permit was granted by the Ministry of Investment/Investment Coordinating Board based on the recommendation from the Energy and Mineral Resources Ministry.

Before the divesment, Arifin said, the government had to issue special mining business permit first. 

The first reason is when there is no special business mining permit, it will be difficult to secure The Financial Services Authority (OJK)’s approval because it is considered as high uncertainty.

Second reason is that the two parties, MIND ID and PT Vale Indonesia, have agreed that the special mining business permit is issued first before the payment of shares divestment.

Third, conditional sales and purchase agreement have been binding.

Fourth, there is anti trust agreement from several countries regarding government seriousness in issuing special mining business permit for PT Vale Indonesia. 

PT Vale Indonesia has been considered as having fulfiled its divestment obligation in 1990 by releasing 20 percent of its shares in Jakarta Stock Exchange. The shares traded in the stock exchange is considered as government shares. The offering of 20 percent of the shares was part of the company’s divestment obligation based 

on 1998 contract of work that was strengtened with the amandement of contract of work in 2014. 

PT Mineral Industri Indonesia (MIND ID), together with Vale Canada Limited (VCL) and Sumitomo Metal Mining Co., Ltd. (SMM) signed a share sale and purchase agreement for the divestment of PT Vale Indonesia (INCO) on February 26, 2024.

This agreement is a continuation of the Heads of Agreement signed on November 17, 2023. MIND ID together with VCL and SMM have agreed on the acquisition of PT Vale Indonesia shares by MIND ID, amounting to 14 percent of the total share ownership of the company.

The agreement signing is a crucial step for PT Vale Indonesia to fulfill its divestment obligations, as required by the Mineral and Coal Mining Law. This is a necessary prerequisite for extending PT Vale Indonesia’s Contract of Work through a Special Mining Business Permit (IUPK).

Gusty da Costa






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