Vale Canada, Sumitomo Metal sign initial agreement to sell 14% stake in Indonesia nickel miner

JAKARTA (Reuters) -Vale Base Metals said its Vale Canada unit and Japan’s Sumitomo Metal Mining signed an initial agreement on Friday to sell a 14% stake in their Indonesian nickel mining unit to Indonesia’s state miner.

Vale Canada and Sumitomo signed the so-called heads of agreement to sell the shares to PT Mineral Industri Indonesia (MIND ID), the country’s state mining holding company, Vale Base Metals said in a statement.

Share divestment is a condition required by Indonesia to extend Vale Indonesia’s mining permit, which will otherwise end in 2025. Foreign investors are required to divest 51% of their stakes to local buyers after a certain period of operation.

The sales and purchase agreement is expected to conclude at the end of January, the deputy minister for state-owned enterprises, Kartika Wirjoatmodjo, told Reuters on Saturday.

“MIND ID is currently conducting a due diligence and will soon submit its price offer,” he said.

Upon completion, MIND ID will become the largest shareholder of Vale Indonesia with its stake rising to 34% from 20%. Vale Canada will hold 33.9%, down from 43.79%, and Sumitomo 11.5%, down from 15.03%, according to the statement.

Around 20% of Vale Indonesia’s shares are publicly traded.

A “balanced” management structure will be set up to maintain operational stability at the Indonesian unit, the statement said.

“We look forward to working within the new shareholding structure with our partners to support the country’s downstreaming ambitions and deliver strong economic value to our stakeholders and communities over the long run,” said Deshnee Naidoo, chief executive of Vale Base Metals.

Indonesian President Joko Widodo, who watched the signing, said the country welcomed the agreement and appreciated Vale’s commitment to partner with Indonesia.

“The divestment will make MIND ID as the biggest shareholder of Vale (Indonesia), so MIND ID and Vale Canada can exercise a joint control over Vale (Indonesia),” he said in a statement on Friday.

Widodo expressed hope that Vale would increase its support for Indonesia’s efforts to shift to cleaner energy.

Indonesia is keen to develop batteries and electric vehicles to take advantage of its rich nickel reserves.

Vale Base Metals is committing around $10 billion of investment in Indonesia over the next decade.

(Reporting by Fransiska Nangoy; Additional reporting by Stefanno Sulaiman; Editing by Kirsten Donovan and William Mallard)