MIND ID Moves Towards Major Stake in Vale Indonesia
Key Agreement Signed for Stake Divestment
Vale Canada and Sumitomo Metal Mining have agreed to divest part of their stake in Vale Indonesia to Indonesia’s state-owned Mineral Industri Indonesia (MIND ID). The agreement, formalized during the 2023 Asia-Pacific Economic Cooperation Meeting, is a significant step towards MIND ID acquiring a controlling interest in Vale Indonesia.
Meeting Indonesia’s Mining Law Requirements
This divestment is part of compliance with Indonesia's Mining Law, which mandates that foreign investors divest 51 percent of their stakes to local entities. Vale Indonesia’s current contract is due to expire on December 28, 2025. MIND ID’s increased stake will extend Vale Indonesia’s mining permit into a 20-year special mining business permit (IUPK).
Changes in Shareholding Structure
The deal will see MIND ID's share in Vale Indonesia increase from 20 percent to 34 percent, making it the largest shareholder. Consequently, Vale Canada and Sumitomo Metal Mining’s stakes will reduce to 33.9 percent and 11.5 percent, respectively. This shift in shareholding will grant MIND ID the right to appoint key positions within Vale Indonesia, thus influencing its operational and financial decisions.
Terms and Future Hurdles of the HoA
The Head of Agreement (HoA), akin to a Memorandum of Understanding, outlines the framework but not the detailed terms and conditions of the transaction. There could be potential challenges ahead before the final transaction is completed. However, the asset pricing process may be straightforward given Vale Indonesia’s public listing and the relatively small scale of the transaction.
Widening State Ownership in Mining Sector
In parallel, discussions are underway regarding the Indonesian government increasing its stake in Freeport McMoran. President Joko Widodo's meetings with Freeport’s Chairman Richard Adkerson hint at a possible additional 10 percent share divestment for Indonesia as a condition for Freeport’s 20-year concession extension in the country.
Delays in Freeport Indonesia's Smelter Construction
Concerns are also emerging over PT Freeport Indonesia’s delayed smelter construction, currently at 70 percent completion. There are suspicions of economic feasibility issues hindering the smelter's progress.
Implications for Operational Control in Freeport Indonesia
Despite potential increases in Indonesian government stakes in Freeport, operational control issues persist. MIND ID’s majority ownership does not necessarily translate into full operational control due to the current composition of ownership and decision-making dynamics in Freeport Indonesia.
