Aneka Tambang: Mining & metals

THE COMPANY: Aneka Tambang (ANTM) is a vertically integrated, export-oriented, diversified mining and metal company in Indonesia. It is a state-owned enterprise in which the government is a majority shareholder, with 65% of the shares. The remaining 35% shares belong to public investors. The company does exploration, exploitation, production and trading for its main metal products. The company has a mining operation spread throughout the Indonesian archipelago.

ANTM produces metal products composed of highgrade nickel ore, known as saprolite, low-grade nickel ore, also known as limonite, ferronickel, gold, silver and bauxite. In addition, the company has precious metal refining and geological services. As of 2010 ANTM had reached revenues of Rp8.70trn ($1.01bn) with total equity and total assets of Rp9.58trn ($1.12bn) and Rp12.31trn ($1.44bn), respectively. Revenue contributions were composed of ferronickel (42.3%), nickel ore (27.2%), gold (22%), gold trading (5%), silver (2.2%), silver trading (0.6%), bauxite ore (0.4%), coal (0.3%) and others precious metals (0.1%) in the same period. Most of ANTM’s metals products are exported to Europe and Asia. As a result, the company’s revenues are sensitive to global commodities prices of metals and coal. As of 2010 ANTM recorded mineral and ore resources of 371.4m wet metric tonnes of saprolite nickel, 400.3m wet metric tonnes of limonite nickel, 369.5m wet metric tonnes of bauxite and 2m ounces of gold.

DEVELOPMENT STRATEGY: During first quarter of 2011, ANTM recorded improving revenues of Rp1.99trn ($232.05m) compared to Rp1.66trn ($192.89m) in the first quarter of 2010. Gross profit rose by 32% year-onyear (y-o-y) to Rp625.86bn ($72.95m) and operating profit increased by 36% y-o-y to Rp470.07bn ($54.79m) on the back of rising ferronickel sales volume and commodities prices. As a result, ANTM’s net profit jumped by 72% y-o-y to Rp346.56bn ($40.39m) in the same period of comparison. Furthermore, gross margins soared from 28.7% in the first quarter of 2010 to 31.4% in the first quarter of 2011. Operating margins also improved from 20.9% to 23.6%. Meanwhile, the firm’s net profit margin rose from 12.2% to 17.4%.

ANTM has consistently performed well in recent years, due to strong financial results. ANTM is projected to reach revenues of Rp9.10trn ($1.05bn) in 2011 and Rp13.59trn ($1.58bn) in 2012, based on the projected increase of metals prices due to rising global demand. As a respected public company, ANTM aims to increase its corporate value through a variety of corporate strategies. Firstly, the company will focus on the increasing value of core commodities and introduce modernisation and optimisation strategies with the aim of improving its efficiency and productivity. Secondly, ANTM will maintain its solid financial strength by considering the development of coal-fired power plants to reduce its ferronickel costs. ANTM’s acquisition of the Sarolangun coal mine, which cost Rp92.5bn ($10.78m), is expected to produce some 700,000 tonnes of coal in 2011. In addition, ANTM should diversify its financing sources, such as bilateral loans, bonds and equities in order to optimise its capital structure.

OUTLOOK: ANTM will also maintain its sustainable business growth through a variety of development projects.

At the moment, ANTM has a plan that includes five key projects that should serve to increase its corporate value in the long run. These five projects are: the Tayan Chemical Grade Alumina project, with an estimated cost of $450m; the Feni Halmahera project, which will include a power plant and is expected to cost $1.6bn; the modernisation and optimisation of ANTM’s ferronickel smelters, with the aim of improving efficiencies, is expected to cost between $450m and $500m; the Mandiodo Nickel Pig Iron (NPI) project, with an estimated cost of $350m-400m; and the Mempawah Smelter Grade Alumina project, which is expected to cost around $1bn. ANTM’s continued plan of value creation through its various development projects will positively impact its stock price appreciation, which in turn will benefit its shareholders. Thus, ANTM is considered to be a valuable investment for the long term.