PT Inalum owner sees big gap with Indonesia in stake sale talks

The Japanese majority-owner of Indonesian aluminum producer PT Inalum said there was still a big gap to bridge in talks to sell its stake to the Indonesian government, with less than two months to go before their joint venture agreement expires.

Yoshihiko Okamoto, chairman of Japan's Nippon Asahan Aluminium, told Reuters on Thursday the talks would continue until the end of October, but if no agreement was reached by then, it would take the issue to an international mediator.

"As of today, there is a large gap between us and the Indonesian government on sale price and other sales terms," he said, without elaborating.

Nippon Asahan, a consortium of 12 Japanese firms which holds 58.88 percent of PT Inalum, is in talks to sell its stake to the Indonesian government, which owns the rest, ahead of the expiry of their 30-year agreement on October 31.

The talks over PT Inalum, which produced 246,000 metric tons of aluminium in the year ended March 2012, are part of Indonesia's efforts to generate increased revenue from its natural resources and curb foreign ownership in the sector.

The Japanese side had asked Indonesia to renew the contract or to allow it to keep a minority stake in the venture after the current agreement expires, but the Indonesian government has indicated an extension was unlikely.

Okamoto said the negotiations, therefore, were now focused on a sale, including the price tag.

Indonesia's industry minister said last year it was in talks to buy the stake for an estimated $700 million, but two sources familiar with the negotiations said last month that Indonesia's actual offer was far below that level.

Okamoto, who is also senior managing executive officer of Sumitomo Chemical Co., Ltd. (4005.T), a stakeholder and coordinator of Nippon Asahan, did not disclose the specific level of the offer.

"We still strongly hope to reach a compromise on the terms both parties are satisfied with and we'll continue our utmost efforts for that through next month," he said.

"But if that does not happen, we will need to bring this issue to an international mediator," he said, pointing to the International Center for Settlement of Investment Disputes (ICSID).