State-owned miner picks 20% in Vale Indonesia to up play in EV battery value chain

Photo: Dominik Vanyi/Unsplash

State-owned Mining Industry Indonesia, formerly known as PT Inalum, on late Wednesday finalised plans to buy a 20 per cent stake in PT Vale Indonesia (INCO) Tbk, one of the world’s largest nickel miners, for Rp 5.52 trillion ($ 375.54 million). 

With this transaction, PT Inalum will become the second-largest shareholder in the nickel mining venture.

Prior to the deal, Vale Canada Limited (VCL) and Sumitomo Metal Mining Co., Ltd (SMM) held 58.73 per cent and 20.09 per cent respectively in the nickel mining venture. VCL divested 14.9 per cent while SMM offloaded 5.1 per cent, at Rp 2.780 per share, to the state-owned miner.

The transaction follows government regulation that requires foreign-controlled miners to reduce their ownership to 49 per cent or below within 10 years of starting operations. 

On Wednesday, INCO shares closed at 3.440 per share, a drop of 4.97 per cent, from Tuesday’s trading. 

Post the transaction, PT Inalum will own 20 per cent, Vale Canada Limited (44.34 per cent), Sumitomo Metal Mining (15.03 per cent), Sumitomo Corporation (0.14 per cent) while the public will hold the remaining 20.49 per cent.

“Indonesia is the world’s largest nickel producer so the Vale Indonesia transaction is an important part of the national mining downstream industry that has a strategic role in the global nickel industry. It is also a forward step to strengthen the value chain in Indonesia, and the electric vehicle battery industry development,” SOE minister Erick Thohir said in a press statement. 

As the second-largest shareholder, the state miner will have strategic access to secure the raw material supply for the downstream nickel industry, either for stainless steel or batteries for electric vehicles. 

Indonesia is the biggest nickel ore exporter supplying the main raw material for electric vehicle batteries, accounting for 27 per cent of global market demand. According to Statista, the global production of nickel in mines was estimated to be around 2.7 million metric tonne in 2019.

Indonesia was the largest producer with 800,000 million metric tonne followed by the Philippines, Russia, and Canada. Meanwhile, the total global demand for nickel reached 2.32 million metric tonne in 2019. China is also the world’s largest nickel consumer accounting for 55 per cent of world demand.

In January 2020, the government banned nickel export to accelerate the establishment of domestic smelters while its nickel reserves are limited. 

The state miner plans to build lithium-ion plants near two nickel mining sites owned by PT Antam at Tanjung Buli, East Halmahera, and at North Konawe, Southeast Sulawesi. The plan is to compete in the EV battery market currently dominated by China, which holds a 27.9 per cent share. 

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.