PT Vale Indonesia Tbk (INCO) is currently evaluating the possibility of increasing its stake in PT Kolaka Nickel Indonesia (KNI) from the current 18.3% to 30%.

Currently, the shareholding structure of KNI is predominantly by Huaqi Pte Ltd, a Singapore-based company, which owns 73.2% of the shares. This amounts to 764,000 shares, valued at IDR 764 billion. Vale Indonesia owns 18.3% of the shares, or 191,000 shares valued at IDR 191 billion, while Ford Motor Company holds 8.5%, or 88,716 shares valued at IDR 88.7 billion.

Febriany Eddy, President Director and CEO of Vale Indonesia, stated that Vale will evaluate its ownership in KNI after the High Pressure Acid Leaching (HPAL) plant is completed. This is because Vale has a call option to increase its ownership to 30% in KNI.

"After the HPAL plant is completed, we will evaluate whether we will increase our ownership to 30%," said Febriany during a public presentation on Tuesday, August 27, 2024.

KNI is a joint venture (JV) between Vale, Huaqi (Singapore) Pte. Ltd., and global automobile manufacturer Ford Motor Company. Febriany mentioned that KNI will become a tenant in the Indonesia Pomalaa Industrial Park (IPIP).

According to the HuayouIndonesia website, IPIP is an integrated and comprehensive industrial park that is part of the lithium battery industry chain in Southeast Sulawesi. The companies in IPIP include HPAL, RKEF, refining, precursor, cathode materials, ternary lithium batteries, battery recycling, and various other companies.

In Pomalaa, Vale is also collaborating with Zhejiang Huayou Cobalt and Ford to build a High Pressure Acid Leaching (HPAL) project valued at IDR 70 trillion, with a production capacity of up to 120,000 tons of mixed hydroxide precipitate (MHP) per year, which is expected to be completed by 2026.

At the same event, Rizky Andhika Putra, Independent Director & Chief Financial Officer of Vale Indonesia, reported an unrealized loss of USD 6.12 million or IDR 72 billion in the second quarter of 2024. This loss stems from Vale’s additional investment in KNI, which is structured as a call option. A call option is a contract that grants the holder the right to purchase the underlying asset at a predetermined price at a future date.

In this context, Vale has the right to repurchase KNI shares at a previously agreed-upon price. Rizky explained that INCO’s investment in KNI is recorded as a loss due to fluctuations in the valuation of derivative assets.

“This has to be recorded as a gain or loss in our books as per accounting standards. However, it is important to note that this is an unrealized and non-operational gain or loss,” he clarified.

Excluding the impact of derivatives, Rizky mentioned that Vale posted a normalized profit of USD 18 million in the first quarter of 2024 and USD 38 million in the second quarter of 2024.

"This means that, on a normalized basis, we recorded a normalized profit of USD 56 million for the first half of 2024," he added.

According to Vale Indonesia’s financial report published at the end of July 2024, the company posted a net profit attributable to the owners of the parent entity of USD 37.28 million in the first half of 2024. This figure represents a sharp decline of 82% compared to the same period last year, when it stood at USD 207.8 million.

Vale Indonesia's revenue also dropped by 27.3% to USD 478.75 million from USD 658.96 million. Operating profit plummeted by 74.6% to USD 48.87 million from USD 192.91 million, while gross profit fell by 72% to USD 61.58 million from USD 220.47 million.

Despite this, Vale Indonesia managed to achieve a profit of USD 31.1 million in the second quarter of 2024, marking a significant increase compared to the previous quarter. EBITDA also turned positive, amounting to USD 72.4 million in the second quarter of 2024, up 38% from the previous quarter.

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