Following PT Vale Indonesia’s plan to divest 11% of its shares to MIND ID, it turns out that the company have come black marks, including the presence of illegal mines within the company’s concession area. Back in 2020, illegal mining practices in Vale’s mining concession area were massive,
Based on data released by Greenpeace Indonesia, there were 792.22 hectares of illegal mines within Vale’s mining concession area. As many as 605.99 hectares were located in the Bahodopi block, 97.45 hectares were in Sorowako Block, while the remaining 88.78 hectares were located in Pomala Block.
These mines are illegal because they are located within forest areas outside the areas that have been provided with forest land use permit from the Ministry of Forestry and Environment.
Illegal miners managed to enter Vale’s concession areas because of the fact that the company cannot effectively monitor it. Currently, Vale possesses 118,017 hectares of concession area spread across Central Sulawesi, Southeast Sulawesi, and South Sulawesi. The number is much smaller compared to the initial 6.6 million hectares granted by the Indonesian government back in 1968.
According to A. Rahmansyah, Acting Chief of the South Sulawesi Forestry Agency, all illegal mining activities have ceased in 2022. However, he admitted that there are still illegal nickels that have not been transported.
Meanwhile, Greenpeace’s Team Leader of Forest Campaigner Arie Rompas, asserted that the illegal mining practices were possible because of lack of supervision by the government and lack of law enforcement.
“The ones suffering the effect of the illegal mining are the local residents,” Rompas said.
Boon to local residents
Marko, a resident of Bahomotefe, a village in Morowali, Central Sulawesi, admitted that in his village there were illegal mining activities. However, the activities have stopped since March 2022. Marko was delighted that the mining stops because people were affected by the environmental damages such as landslides and mining dust.
Nevertheless, Marko did not deny that the illegal activities bring life to the local economy. He explained that local residents were able to make money by collecting ‘shipping fee’ from miners. He said that once there was a contractor to refuse to pay this ‘shipping fee’. “We barred the entrance to the port until they paid.” he said.
Divestment tug-of-war
Currently, Vale Indonesia shares are owned by Vale Canada Ltd. (43,79%); Sumitomo Metal Mining (15,03%); PT Indonesia Asahan Aluminium (20%); Vale Japan Ltd (0,55%); Public owners (20,49%) dan Sumitomo Corporation (0,14%). Recently, the government ordered Mind ID, a state-owned enterprise holding company, to acquire more of Vale Indonesia’s share.
Mind ID’s management however, was somewhat contentious because they can only buy 11% of Vale’s shares consisting of 8.195% of Vale Canada shares and 2.805 % of Sumitomo shares. Consequently, Indonesia will only owns 31% percent of Vale Indonesia’s shares while Vale Canada will continue to be the majority shareholder with around 35% shares.
The major issue is that with such share portion, Mind Id will only be able to watch as Vale Canada control all strategic policies of Vale Indonesia.
In an effort to gain control, Mind ID had requested Vale Indonesia to release 20% of its shares to Mind ID, and allow Mind ID personnel to act as president director and finance director of the company. These requests however, were immediately rejected by Vale Canada. “It’s a dead end,” said a government official source with knowledge of the divestment negotiation.
The sources also added that Vale Canada’s decision to reject Mind Id’s request is that Vale Canada is confident that Vale Indonesia will be able to obtain an extension to its special mining operation permit before January 1, 2024.
