The country’s largest nickel producer, Vale Indonesia, says it will need assurances from the government on contract details before going ahead with its gigantic investment plan in Sulawesi.
“This renegotiation is very important to implement our whole plan. It is a precondition,” Ricardo Carvalho, president commissioner of Vale Indonesia, said late on Wednesday.
The company, formerly known as Inco Indonesia, plans to invest $2 billion to expand its smelter in Sorowako, South Sulawesi, and to build a refinery in Bahodopi, Central Sulawesi.
The company expects to double its production capacity in Sorowako to 120,000 tons of nickel matte and build a refinery in Bahadopi that will account for 18,000 tons of Sorowako’s production capacity.
Nicolaas Kanter, the chief executive of Vale Indonesia, said that currently the company exported all of its nickel matte to Matsusaka, Japan, to be further refined into high-grade nickel.
However, to move ahead with the expansion plan, Carvalho, who is also responsible for the parent company’s base metal operations in the Asia Pacific and Africa, said the main challenge was to complete the contract renegotiation. “We have to have some security if we are going to fulfill our plan,” he said.
The government has introduced a new mining law requiring miners to divest their stake to 49 percent as part of the renegotiation terms with foreign mining companies operating in Indonesia.
Kanter said the terms were also a cause of concern for the company. The government has sought to raise the royalty to as much as 4 percent from the current level of 1 percent of sales.
He did not reveal the company’s position on the matter, but he said “we are willing to meet in the middle.”
Vale Indonesia is set to start early works next year such as earth moving, road and infrastructure development in the area, Carvalho said. He said he hoped to start the full investment in 2014 to 2016.
Vale Indonesia is 59 percent controlled by Vale Canada — a unit of Brazil’s Vale. Vale is now the world’s second-largest mining company. In January, the parent company was named the world’s worst in relation to human rights and environmental policy by Public Eye, a non-governmental watchdog.