Govt to cut down concession areas of Freeport and Inco

In addition to Freeport Indonesia, the government also plans to reduce the concession area of nickel mining company PT Vale Indonesia (formerly known as Inco) as part of renegotiations of their mining contract, Kontan reported on Thursday.

Thamrin Sihite, the director general of mineral and coal at the Energy and Mineral Resources Ministry, said in Jakarta on Wednesday that the reduction of the size of Vale?s concession areas would be made with a consideration of the remaining period of its contract and the level of the daily production.

?It is certain that the size of the concession area of Inco [Vale) will be cut down,? Thamrin said. But he did not elaborate.

In addition to the reduction of the concession area, the government is also renegotiating the mechanism in determining the royalty payment. At present, Vale?s royalty payment is based on production level. The government wants to peg the royalty payment with nickel prices so that it can receive higher royalty payment if there is an increase in price.

International Nickel Indonesia (Inco), the country?s largest nickel producer, changed its name to Vale Indonesia last year after Brazilian mining giant Vale acquired Canada-based International Nickel, which was the major shareholder in Inco Indonesia.

Vale?s concession area is the second largest after Freeport Indonesia. Besides, Inco and Freeport, the government also plans to reduce the concession areas of several other mining companies (see table) (*)

Concession areas reduction plan

Names	Current concession area (hectares)
PT Vale Indonesia Tbk	190,513
PT Berau Coal Tbk	118,400
PT Agincourt Resources	163,927
PT Freeport Indonesia	202, 950
PT Nabire Bakti Mining	199,504
PT Kumamba Mining	125,000
PT Irja Eastern Minerals	180,930
PT Iriana Mutiara Idenburg	108,600
PT Citra Palu Minerals	138,889
Source: Source: Indonesian Mining Association