Vale Says Some Progress Made on Contract Talks – by Muhamad Al Azhari (Jakarta Globe – April 24, 2013)

Vale Indonesia, the local unit of the global nickel giant, says it has made progress in mining contract renegotiations with the Energy and Mineral Resources Ministry.

“There are four items that we continue to discuss,” Vale president director Nico Kanter told reporters after a shareholders meeting in South Jakarta on Tuesday, declining to reveal more specific details on the talks. “We are optimistic. … If the government has good intentions, we also have good intentions.”

Nico said the company’s $2 billion nickel smelter plan will depend on the outcome of the renegotiations. “We have plans to boost the capacity of the smelter that we already have. Our target is to produce 120,000 tons of nickel in 2017,” Nico said.

Several miners are currently renegotiating their contracts after the passage of a 2009 mining law designed to elicit more local benefits from the sector, by increasing the royalties paid by miners and adding value to mineral commodities exports.

The 2009 law included an obligation for miners to submit plans to process raw materials domestically before 2014, limits on concession areas, higher royalties for the government and an obligation for foreign miners to gradually divest their shares to local entities five years after production commences.

Miners affected by the law include Freeport Indonesia and Newmont Nusa Tenggara.

Freeport Indonesia, which is 90.64 percent controlled by Arizona-based Freeport-McMoRan Copper & Gold, operates the biggest copper mine on Papua. NNT runs the Batu Hijau mine in Sumbawa island in West Nusa Tenggara.

Vale first flagged the $2 billion investment plan last year, saying it would nearly double its nickel production in Indonesia within a few years. The bulk of the $2 billion would go toward upgrading the electricity capacity of its nickel ore smelters.

The additional power is one step in the company’s plan to expand upon its 67,000 tons of nickel ore production last year.

Vale has mining operations in Sorowako, South Sulawesi; Pomalaa, Southeast Sulawesi; and Bahodopi, Central Sulawesi.

Nico on Tuesday also predicted that 2013 nickel sales would reach 79,000 tons, up 10 percent on last year.

Vale reported a dramatic fall in net income to $68 million last year from $334 million a year earlier.

The company attributed the performance to the weakening metal and nickel markets, as the global economic slowdown lowered selling prices.

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