Jakarta. Nickel miner Vale Indonesia (INCO) signed an agreement to divest 14 percent of its shares, valued at Rp 4.2 trillion ($268 million), to a consortium of state-owned mining companies Mineral Industri Indonesia (MIND ID) on Monday.

The definitive agreement was formally signed by Vale's shareholders: Parent company Vale Canada Limited (VCL), MIND ID, and Sumitomo Metal Mining Co Ltd (SMM).

Under the terms of the agreement, Vale Canada and Sumitomo Metal Mining will divest 14 percent of Vale Indonesia's shares, equivalent to 1.39 billion shares, through a rights issue on the Indonesia Stock Exchange (IDX) at Rp 3,050 per share, transferring ownership to MIND ID. 

This divestment is a crucial step for Vale to secure an extension of its mining permit in Indonesia, which will expire in December 2025. Under the prevailing laws and regulations, Vale Indonesia has to achieve 51 percent Indonesian ownership by December 2025 as part of the extension of its long-term operating license.

Previously, MIND ID held a 20 percent stake in Vale Indonesia, while Vale Canada and Sumitomo Metal Mining held 43.79 percent and 15.03 percent, respectively.

Following the completion of the divestment, MIND ID will become the majority shareholder, holding 34 percent of INCO shares. Meanwhile, Vale Canada and Sumitomo Metal Mining will each retain 33.9 percent and 11.5 percent. The remaining 20.6 percent will be publicly owned.

Upon the closure of the transaction, expected before the end of 2024, Vale Canada is set to receive a cash sum of $160 million.

"This Agreement signals the commitment made by Vale Base Metals to PT Vale, the Indonesian people, and to our stakeholders to unlock value from our assets. Our focus will now turn to realizing the future potential of PT Vale's growth investments across Sulawesi," Mark Cutifani, Chair of Vale Base Metals (VBM), expressed in an official statement.

As a shareholder in MIND ID, the Ministry of State-Owned Enterprises will actively encourage the industrialization of nickel sourced from Vale Indonesia in three mining locations to bolster the electric vehicle battery ecosystem. These locations encompass Bahodopi, Pomalaa, and Tanamalia in South Sulawesi.

It has been reported that MIND ID is actively seeking $2 billion in loans to facilitate the acquisition of Vale stakes and to refinance existing debts.