Eramet Unit, Indonesia Agree on Some Contract Review Points

Eramet SA (ERA) unit PT Weda Bay Nickel, negotiating with Indonesia to set up a $5 billion nickel mine and smelter, agreed on four out of six points in a government review of the company’s mining contract.

Indonesia will allow Weda Bay to set up the mine and facilities in an area greater than 25,000 hectares (61,776 acres), Thamrin Sihite, director general of coal and minerals at the Energy and Mineral Resources Ministry, said in Jakarta today. In return, Weda Bay will build the smelter, use local workers and services and continue its business under a new mining license after its 30-year contract expires in 2028, Sihite said.

Indonesia began reviewing all mining contracts in January 2012 to ensure they were in line with the country’s interests and increased state revenue. A panel, set up to review the agreements, has until December 2013 to complete its work, according to a decree signed by President Susilo Bambang Yudhoyono.

“We are still discussing state revenue and divestment,” Sihite said. The government wants the company to pay higher royalty and foreign shareholders to reduce their stake to 49 percent, he said. Eramet, a French mining group, and Japan’s Mitsubishi Corp. (8058) and Pacific Metal Co. own 90 percent of Weda Bay. Indonesia’s state-owned miner PT Aneka Tambang (ANTM) owns the remainder, according to the company’s website.

Weda Bay’s President Director Alain Bernard Henri Giraud met with Sihite today to discuss progress on the contract review, the energy ministry said in a separate statement posted on its website. The company plans to build the project in Halmahera island in Indonesia’s North Maluku province. It may start operating by 2019, Sihite said.

Weda Bay will use 80 percent of its $5 billion investment for smelter construction and the rest for developing the mine, the company said in a statement today. It will employ about 2,300 workers, of which 65 percent will be locals.

Indonesia limited exports of mineral ore in May 2012 to boost revenue from higher-value processing at home.

To contact the reporter on this story: Fitri Wulandari in Jakarta at fwulandari@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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