Govt, Vale sign MoU on mining contract amendment

IDX-listed nickel miner PT Vale Indonesia and the Energy and Mineral Resources Ministry have signed a memorandum of understanding (MoU) on proposed changes to the mining company?s contract of work (CoW), The Jakarta Post reported Saturday.

In the MoU both the ministry and Vale agreed to further discuss the details of the amendments to the company?s CoW, the ministry?s minerals and coal director general, R. Sukhyar, said on Friday.

?The company has agreed to six issues in the CoW renegotiations, including higher royalties of 2 percent from the previous 0.9 percent. It also agrees that the royalties will rise to 3 percent if the nickel price reaches US$21,000 [per ton],? Sukhyar said, adding that the agreement had been signed last month.

Vale Indonesia president director Nicolaas D. ?Nico? Kanter said late last week that the company expected to seal the amendments to its CoW before the new government took office. ?I note the government?s willingness to finish it during the current Cabinet?s term,? Nico said.

He added that details on the royalty adjustment would be discussed when drafting the amended CoW and the company had no objection to the government?s proposal.

Vale Indonesia is planning new investments amounting to around $4 billion, a plan that is dependent on agreement to the amendments.

Nico said the company would also ensure that with the amended contract it would still be able to get a fair return from the billions of dollars it had invested. ?This is what we?re also asking of the government that we be given time to ensure our return on investment. This is up to the government and we are sure that it will make an appropriate and reasonable decision," Nico said.

Under the current CoW, Vale Indonesia is permitted to operate in Indonesia until 2025. (*)