INCO admits that there are management fees at Vale Canada, what are they for?

Jakarta, CNBC Indonesia – PT Vale Indonesia Tbk (INCO) admits that the company pays special management and technical fees to Vale Base Metals as the major shareholder based in Canada.

PT Vale Indonesia Legal Director Anggun Kara Nataya said the fees paid for Vale Base Metals were in the form of technical assistance or technical assistant fee as set out in the Technical Assistant Contract and management assistance costs as set out in the Management Assistant Contract.

“Maybe I would say that the PT Vale Indonesia management agreement is indeed official with Vale (Base Metals). There is no hidden payment, we always disclose it in public financial reports and we always report it to the OJK, the stock exchange and the public. “, said Anggun during a hearing meeting (RDP) with Commission VII DPR RI, Jakarta, Tuesday (29/8/2023).

He clarified that the filing was used to obtain help in terms of technology since the technology used by INCO came from parent company Vale. In this way, Vale Canada’s services are necessary to maintain the technology owned by Vale Indonesia.

“Help on the technological side, so when the factory was built in 1970, it used Canadian technology from Vale. For the technological process, they had their help,” he added.

He also clarified that the contributions paid to the parent company were financed from the company’s income at the rate of 1% per year.

“In general, the service fee from year to year, the amount paid continues to decrease until now in 2022 it was 1% of our net profit, and it is not a fixed fee that we pay to Vale (Canada),” he explained.

The existence of corporate management fees for Vale Base Metals was revealed by the presentation of MIND ID President Director Hendi Prio Santoso.

Hendi said Vale Base Metals had a technical assistance agreement or technical assistance agreement and management assistance or management assistant agreement with PT Vale Indonesia Tbk (INCO).

According to him, this agreement allows Vale Base Metals to earn income from technical assistance and management fees.

This is contradictory to what MIND ID has achieved by being a shareholder of PT Vale Indonesia for the past three years. Hendi said MIND ID has only received one dividend despite being a shareholder since 2020.

Therefore, if MIND ID divests its shares and becomes the majority shareholder of PT Vale Indonesia, it will cancel the support and management agreement with Vale Base Metals.

“And we are committed to ensuring a more consistent dividend distribution and eliminating the management and technical assistant fees that arise from the management assistant agreements and technical assistant agreements that Vale Base Metal takes from earnings, of sales. Meanwhile, we only receive dividends one out of three times. “We want to ensure that this is eliminated in the event of further disinvestments in the future,” explained Hendi on the same occasion.

As is known, Vale Canada Limited and Sumitomo Metal Mining Co. Ltd. agreed to offer 14% of the shares to MIND ID Mining BUMN Holding. This is part of a series of plans to divest Vale’s shares in Indonesia.

If the divestment is 14%, it means that MIND ID will own 34% of PT Vale Indonesia Tbk (INCO) shares. Currently, MIND ID only owns 20% of PT Vale Indonesia’s shares.

With the 14% share sale offer, the shareholding composition of PT Vale Indonesia Tbk will change as follows:

– Vale Canada Limitée, from 43.79% currently, will increase to 33.29%.
– Mind ID from the current 20% will increase to 34%.
– Sumitomo Metal Mining from 15.03% currently will increase to 11.53%.
– Vale Japan Ltd at 0.54%.
– The public becomes 20.64%.

[Gambas:Video CNBC]

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