Indonesia state miner agrees to buy 20% stake in Vale Indonesia

JAKARTA (Reuters) - Mining Industry Indonesia, the state miner formerly known as PT Inalum, said on Monday it has signed an initial agreement to buy a 20% stake in nickel miner PT Vale Indonesia INCO.JK for an undisclosed sum.

FILE PHOTO: Trucks carry raw nickel ore near Sorowako, Indonesia's Sulawesi island, January 8, 2014. REUTERS/Yusuf Ahmad/File Photo

The planned sale was flagged by the Indonesian government last week as Vale Indonesia seeks to comply with rules that require foreign controlled miners to reduce their ownership to 49% or below within 10 years of starting operations.

Vale Indonesia is currently around 59% owned by Brazil's Vale SA VALE3.SA and around 20% by Japan's Sumitomo Metal Mining Co Ltd.

“The (shareholder) structure is still being discussed, but foreign participation will be reduced to 60% or less,” Rendi Witular, a spokesman for Mining Industry Indonesia, told Reuters by text.

Asked about the sale price, Witular said it would be a “fair market value.”

Vale Indonesia’s share price rose as much as 2.4% after the announcement, to touch 3,920 rupiah, its highest in a month, giving the company a market capitalization of 38 trillion rupiah ($2.69 billion), according to Eikon Refinitiv data.

Mining Industry Indonesia said in a statement that its stake in Vale Indonesia would give it strategic access to the raw material needed to expand Indonesia’s downstream nickel industry.

The Indonesian government is keen to build an holistic onshore electric vehicle (EV) industry, covering everything from the production of nickel chemicals needed for batteries, through to producing those batteries and eventually building vehicles domestically.

Vale Indonesia, which produced 74,806 tonnes of nickel in matte last year and expects to produce 70,000-72,000 tonnes this year, said the deal positions the company to “contribute to the development of Indonesia.”

Mining Industry Indonesia changed its name from PT Inalum in August to distinguish its holding company function from its smelting operational business.

Reporting by Wilda Asmarini, additional reporting by Fransiska Nangoy; Editing by Christian Schmollinger and Jane Wardell