Vale to invest $2b to boost output, ready to renegotiate contract
Thursday, August 9 2012 - 03:08 AM WIB
Indonesia-listed Sulawesi nickel miner PT Vale Indonesia Tbk said it will invest US$2 billion to boost output to 120,000 tons per annum from 75,000 tpa currently and is ready to renegotiate terms of its contract of work (CoW) with the government.
President Commisioner Ricardo de Carvalho told reporters on Wednesday that the expansion plan will include development of new mine in Luwu regency, South Sulawesi and capacity expansion of smelter in Sorowako and also development of mine and nickel refinery in Bahodopi, which is located in Central Sulawesi.
Carvalho said nickel refinery in Bahodopi will have capacity to produce 18,000 tpa of tonimet. Tonimet is a high quality nickel feed material specifically designed for stainless steel, low alloy steel and nickel alloy producers.
?When expansion program is completed, Vale Indonesia will have production capacity of 102,000 tpa of nickel in matte and 18,000 tpa of tonimet,? Carvalho, who also oversees Vale?s Asia Pacific and Africa base metals operations, said. The nickel refinery will be constructed using technology similar to Vale?s refinery in Matsuzaka, Japan.
Expansion plan also includes construction of 80-km haul road from Sorowako to Bahodopi and construction of a new port in Central Sulawesi. ?Construction of haul road and port will have significant economic impact since it will link South Sulawesi and Central Sulawesi,? he said.
Feasibility study for the project has been completed and currently Vale is undertaking engineering design stage, Carvalho said, adding that construction will take three years to complete.
Vale will begin early works for the expansion plan which will begin next year, but major construction works will start when contract of work renegotiation with central government is completed, he said.
For longer term planning, Vale also has plan to build ferronickel smelter and hydrometallurgy smelter in Bahodopi, Carvalho said. Vale has signed MoU with a major Japanese company to investigate possibility to develop hydrometallurgy smelter in Bohodopi.
Vale Indonesia President Director Nico Kanter said that the company is ready to renegotiate terms and condition of its CoW and has submitted proposal to the government.
The main points in the proposal is that Vale is willing to renegotiate royalty fee, willing to relinquish part of its vast concession or to cooperate with companies appointed by local governments to exploit part of the concession. Vale is also looking for contract extension of its concession, which will end in 2025.
?Vale is ready to renegotiate with good faith,? Kanter said, adding that the company hoped to conclude renegotiation in six months.
The central government is forcing all CoW and coal contract of work (CCoW) holders to renegotiate terms and condition to increase government?s revenue from royalty and to minimize idled concession by shrinking down concession size.
?Vale is also seeking confirmation from the government that it will no longer be required to divest stake as it has been listed at the Indonesian Stock Exchange,? Kanter said.
In order to invest $2 billion, Vale will also need to have a strong signal of contract extension guarantee, Kanter added.
Vale Indonesia, which is controlled by world?s second largest mining company Vale, has concession of 190,000 hectares which covers 6 regencies in three different provinces.
Permits headache
Kanter said one of the main hurdles for the expansion project is securing forestry permit as some of the concession area that will be developed is located in forestry area. ?We are hoping to get support from local and central governments to get forestry permit secured,? Kanter said.
Securing forestry permit for mining activities has been one of the major headaches for mine developers in Indonesia as procedures are complicated and full of uncertainty. A number of big mining projects such as BHP?s coking coal project development in Central Kalimantan are delayed over forestry permit.
Editing by David Mustakim