Brazil's Vale SA said on Friday that a revised nickel-mining contract with Indonesia will raise maximum royalties, cut land holdings and require its Indonesian unit to sell another 20 percent of its shares to local investors. Royalties were set at 2 percent in the deal and could rise to as high as 3 percent, more than double the previous 0.6 percent and 0.7 percent, said Nico Kanter, chief executive of Vale's Indonesian subsidiary PT Vale Indonesia TBK.
The royalty hike will "definitely affect our bottom line," Kanter told reporters in Indonesia. He didn't elaborate on the impact. Vale officials in Rio de Janeiro were not immediately available for comment. Vale preferred shares, the company's most-traded class of stock, have lost about 20 percent in Sao Paulo in the last 12 months. The shares rose 0.3 percent to 23.08 reais in Sao Paulo on Friday.
Vale, which owns 59.2 percent of Vale Indonesia, controls the subsidiary in partnership with Japan's Sumitomo Corp, which owns 20.1 percent, Vale's press office in Rio de Janeiro said. Indonesian investors have already purchased 20 percent of Vale Indonesia. The sale of the additional 20 percent will be done within five years and come out of Vale and Sumitomo's stakes, a Vale press officer in Toronto said in an e-mailed response to questions.
The increased costs and obligations come as Vale and other nickel miners face rising intervention by Indonesia's government. The country has banned the export of raw nickel ore, requiring miners to process ore in local smelters. Vale plans to invest $4 billion in Indonesian smelters. Smelters use heat and chemicals to remove oxygen and other elements from the ore, leaving pure, metallic nickel behind. The money will be spent upgrading smelters on the island of Sulawesi, half at Vale's plant at Pomala and the other half at its Sorowako facility, Kanter said.
Comments
Comments are closed.