Similarly, in the oil and gas industry we saw a number of large international names depart from their Indonesian oil and gas fields (for a variety of reasons). Indonesian fully state-owned energy giant Pertamina was then put in charge of these oil and gas fields, a move that caused concern over future output at the fields because Pertamina may not have the expertise and capital to extract more oil from these aging fields. This development too was applauded by Indonesian politicians and society at large, even though it may not be the best solution for Indonesia’s oil and gas industry. It is applauded by many because the release of foreign control over Indonesian natural resources is often regarded a move away from colonialism (indeed, the reason why colonizers came to the Archipelago starting from the 16th century was to enjoy food commodities and other natural resources). It is a sentiment that is still very much alive today, especially when big international corporations control the resources.

Moreover, over the past couple of years the Indonesian government introduced bans on exports of unprocessed minerals (such as nickel and bauxite, while more is set to follow in the years ahead). The motive is to encourage the development of a national mineral downstream industry that will add value to exports.

Essentially, it all traces back to Indonesia’s 2009 Mining Law (Law No. 04/2009 on Mineral and Coal Mining), a law that aims at strengthening the position of Indonesia within the management of its mining resources. This law also includes mandatory share divestment for foreign-held companies (over a period of decades), and limits to the size of concession areas, with the overarching aim to make sure that Indonesia gains more from its own resources.

This time it the case of Vale Indonesia that becomes relevant as the company will see its permit expire in late-2025. Let’s zoom in on the case.

Vale Indonesia

Vale Indonesia was established on 25 July 1968, and has developed into a leading mineral mining company in Indonesia, particularly focusing on nickel mining (with its processing plant in South Sulawesi).

The company operates under a Contract of Work (CoW) which was amended on 17 October 2014 and is valid until 28 December 2025 with a concession area of 118,017 hectares on Sulawesi Island (70,566 hectares in South Sulawesi, 22,699 hectares in Central Sulawesi, and 24,752 hectares in Southeast Sulawesi).

Vale Indonesia mines laterite nickel ores and processes these into nickel matte. The average volume of nickel production is around 75,000 tons per year. Its nickel matte is exported (entirely) to Vale Canada Limited and Sumitomo Metal Mining in a long-term special contract agreed upon by the two companies.

The company also plans to build a nickel processing plant in Morowali (Southeast Sulawesi). It involves a processing facility with High Pressure Acid Leaching (HPAL) technology to process limonite ore and produce intermediate products that can be further processing into material for electric vehicle batteries. Another smelter that is being planned by Vale Indonesia is a smelter that processes saprolite nickel into ferronickel, a main material for stainless steel making.

Vale Canada Ltd. (part of Canada-based Vale Base Metals) is the second largest nickel producer in the world. It currently enjoys a 43.79 percent stake in Vale Indonesia.  Sumitomo Metal Mining Co. Ltd., which ranks among the largest mining and smelting companies in Japan, owns a 15.03 percent stake in Vale Indonesia. The table below shows the shareholder composition of Vale Indonesia.


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