PT Aneka Tambang TBK (PT ANTAM Tbk.).BackgroundPT ANTAM Tbk. was incorporated in Jakarta on July 5, 1968, with an authorized capital of Rp 3,800 billion and issued capital of Rp 953.8 billion fully paid up. It is owned 65% by the Government of Indonesia (GOI GOI Government Of India GOI Government Of Indonesia GOI Government of Israel GOI Get Over It (chat) GOI Government of Iraq GOI Gross Operating Income GOI Gene of Interest GOI Gate Oxide Integrity GOI Germanium-On-Insulator ) and 35% by the public. It is a leading Indonesian company in diversified mining and mineral processing industry. ANTAM is a vertically integrated, export oriented, diversified mining and metals company. With headquarter head·quar·ter v. head·quar·tered, head·quar·ter·ing, head·quar·ters Usage Problem v.tr. To provide with headquarters: in Jakarta and operations spread throughout the mineral-rich Indonesian archipelago, ANTAM undertakes all activities from exploration, excavation, processing through to marketing of nickel ore, ferronickel, gold, silver, bauxite bauxite (bôk`sīt, bŏk`–), mixture of hydrated aluminum oxides usually containing oxides of iron and silicon in varying quantities. and iron sands. The company has long term loyal blue chip customers in Europe, Australia and Asia. Due to the vastness of the company's licensed exploration areas as well as known large holdings of high quality reserves and resources, ANTAM has formed several joint ventures with international partners to profitably develop geological ore bodies into profitable mines. The company was formed in 1968 from the merger of several single-commodity state-owned mining companies. ANTAM was first listed on the Jakarta and Surabaya Stock Exchanges when the government sold 35% of the company to the public in 1997. In 1999, ANTAM listed its shares as a Foreign Exempt Listing on the Australian Stock Exchange, augmenting to a full ASX ASX See: Australian Stock Exchange Listing in 2002. In 2003, ANTAM conducted its maiden US$ bond issuance through its Mauritian Subsidiary Antam Finance Ltd. The bonds are listed on the Singapore Stock Exchange. The company's shares are actively traded on the Jakarta Stock Exchange Jakarta Stock Exchange Established in 1977, the largest securities exchange in Indonesia. , with the 35% public ownership mostly comprised of over 200 foreign institutional investors, mainly from the UK and USA. Resources and Reserves decreased ANTAM's estimates of its total mineral resources and ore reserves decreased in 2005. This is due to extraction as well as more detailed drilling activities, which increased the accuracy of the estimates. Increasing the accuracy of the estimates can either increase or decrease the estimated volume of an ore deposit. ANTAM's exploration division, conducted exploration activities focused on nickel, gold and bauxite in Indonesia. The main objectives of the exploration activities are the discovery of new prospects or new resources and to improve the accuracy of reserve estimation through detailed exploration. Nickel In 2005, ANTAM conducted nickel exploration activities at Halmahera, including Gee and Pakal Islands, Southeast Sulawesi and Obi Island. The exploration included geological, geophysical, drilling, analytical and evaluation activities to improve the classification of known ore resources, with a view to supporting ANTAM's long term nickel developments, such as FeNi IV and the HPAL HPAL High Pressure Acid Leaching (ore processing) HPAL Health Physics Analysis Laboratory HPAL Handle to a Palette project. ANTAM will continue to focus activities at Halmahera and Sulawesi, to further delineate ANTAM's holdings of low-grade nickel ore (limonite limonite (līm`ənīt) or brown hematite (hĕm`ətīt, hē`–), yellowish to dark brown mineral, a hydrated oxide of iron, FeO(OH)·nH2 ), high-grade nickel ore (saprolite sap·ro·lite n. Soft, partially decomposed rock rich in clay and remaining in its original place. saprolite ) and Low Grade Saprolite Ore (LGSO). ANTAM will also explore the potential of pig iron pig iron: see iron. pig iron Crude iron obtained directly from the blast furnace and cast in molds (see cast iron). The crude ingots, called pigs, are then remelted along with scrap and alloying elements and recast into molds to produce from the iron cap, located near the surface and overburden o·ver·bur·den tr.v. o·ver·bur·dened, o·ver·bur·den·ing, o·ver·bur·dens 1. To burden with too much weight; overload. 2. To subject to an excessive burden or strain; overtax. n. 1. . This year, ANTAM will review the potential of Obi Island. In line with the operation of FeNi III plant in the first half of 2006, ANTAM has entered into an agreement with PT INCO INCO International Cooperation INCO International Nickel Company INCO Instrumentation & Communications Officer (NASA Mission Control Flight Controller) INCO Installation & Checkout INCO Infanteriecompagnie (Dutch) Tbk. to supply nickel ore for FeNi III from INCO's Pomalaa Timur nickel ore reserves, which are located next to ANTAM's Pomalaa facility. As at December 31, 2005, ANTAM's total saprolite nickel resources and reserves decreased by 12% to 112.05 million wmt and limonite nickel resources and reserves decreased by 12% to 175.45 million wmt. ANTAM's saprolite ore reserves estimation, which excludes resources, decreased by 10% to Rp 30.1 million wmt. For limonite ore reserves, the estimation increased by 49% to 18.45 million wmt. The decreases are the result of excavation as well as further detailed drilling activities at Buli, North Maluku North Maluku (Indonesian: Maluku Utara) is a province of Indonesia. It covers the northern part of the Maluku Islands, which are split between it and the province of Maluku. Maluku province used to cover the entire group. including Sangaji. As a result of ANTAM's drilling activities, total reserves and mineral resources of saprolite nickel ore at Buli increased by 45% to 93.95 million wmt while limonite nickel ore at Buli increased by 2% to 100.6 million wmt. In 2006, ANTAM focused on supporting the mining of the Mornopo mine, which ANTAM opened at the end of 2005, and the exploration of Sangaji will be accelerated in order to anticipate the development of FeNi IV and the HPAL project. In 2005, ANTAM conducted exploration activities at Bahubulu, Tapunopaka and Mandiodo islands, including a hydro-oceanography study for the harbor location plan and a bathymetry ba·thym·e·try n. The measurement of the depth of bodies of water. bath  y·met measurement at selected
harbor locations.
As at December 31, 2005 total reserves and mineral resources of saprolite nickel ore in Southeast Sulawesi, including Pomalaa, decreased by 20% to 18.1 million wmt while limonite decreased by 25% to 74.85 million wmt, due to more accurate drilling activities and extraction. Gold The gold exploration in 2005 was aimed at discovering new prospects in line with the depleting reserves of Pongkor. As at December 31, 2005 total reserves and resources at Pongkor decreased by 18% to 4.5 million wmt with 1.32 million ounces of contained in situ In place. When something is "in situ," it is in its original location. gold metal. The decrease in the estimate is due to the existence of unanticipated unstable geotechnical conditions that have made extraction more difficult. ANTAM carried out the initial phase of gold exploration in West Sulawesi West Sulawesi or Sulawesi Barat (short form Sulbar) is a province of Indonesia, created in 2004. It is on the island of Sulawesi (formerly, Celebes) and includes the regencies (kabupaten , South Sulawesi South Sulawesi is a province of Indonesia, located on the western southern peninsula of Sulawesi island. The province is bordered by Central Sulawesi province to the north, South East Sulawesi province to the east and West Sulawesi province to the west (West Sulawesi province was and Sumatra with the goal of obtaining licenses in 2006 should results be favorable. Advanced stage gold exploration at Seblat, Bengkulu, and Gunung Patah Tiga, Jambi on Sumatra and Bulado in Gorontalo were positive and will be continued in 2006. Having started in 2004, the joint exploration for gold by ANTAM and the Japan Oil, Gas, and Metals National Corporation (JOGMEC) owned by the Government of Japan continued in 2006. The activities covered Cikotok, Banten and Flores, East Nusa Tenggara East Nusa Tenggara (Indonesian: Nusa Tenggara Timur) is a province of Indonesia, located in the eastern portion of the Lesser Sunda Islands, including West Timor. The provincial capital is Kupang, located on West Timor. . Test drilling was performed at Cikotok, and semi-detailed activities were conducted at Flores. In 2006, ANTAM continued detailed exploration activities in other areas mentioned above and Liman Mountain, East Java East Java (Indonesian: Jawa Timur) is a province of Indonesia. It is located on the eastern part of the island of Java and also includes neighboring Madura and Bawean islands. . ANTAM will look for new prospect areas at Kulabu Mountain, West Sumatra West Sumatra (Indonesian: Sumatera Barat, abbreviated to Sumbar) is a province of Indonesia. It lies on the west coast of the island Sumatra, and borders the provinces of North Sumatra (Sumatera Utara) to the north, Riau and Jambi to the east, and , Singkarak Lake, West Sumatra and Sulawesi. Bauxite In 2005, bauxite exploration activities focused on new discoveries and on increasing reserves classification to support the Chemical Grade Alumina alumina (əl  `mĭnə) or aluminum oxide, Al2O3, chemical compound with m.p. about 2,000°C; and sp. gr. about 4.0. project at Tayan, West Kalimantan West Kalimantan (Indonesian: Kalimantan Barat often abbreviated to Kalbar) is a province of Indonesia. It is one of four Indonesian provinces in Kalimantan, the Indonesian part of the island of Borneo. Its capital city Pontianak is located right on the Equator line. . ANTAM conducted exploration
activities on the nearly exhausted Kijang deposit, to determine the
resource estimation using new cut off grades. ANTAM also re-explored the
Wacopek area by implementing a beneficiation beneficiationTreatment of raw material (such as pulverized ore) to improve physical or chemical properties in preparation for further processing. Beneficiation techniques include washing, sizing of particulates, and concentration (which involves the separation of valuable program to estimate economical reserves. The total reserves and mineral resources of washed bauxite from both Kijang and Tayan decreased by 24% to 85.4 million wmt. Washed bauxite at Kijang increased by 54% to 3 million wmt due to extensive exploration activities at Wacopek. Reserves and mineral resources at Tayan decreased by 25% to 82.4 million due to adjustments of the mine design related to the economical mining of Tayan. It was found some of the previous estimated resources could not be extracted. For the first time, ANTAM's estimated proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. at Tayan, of 9.3 million wmt. Nickel and gold were the biggest contributors to Antam's revenues Overall, the revenue of nickel products--100% of which were exported--contributed 84% of revenue in 2006 compared to 76% in 2005. Meanwhile the contribution from gold decreased to 11% from 16% in 2005. Revenues from ferronickel increased 177% to Rp 2,731 billion as ferronickel sales volume increased 92% to 13,389 tonnes while the average price increased by 57% to US$10.14 per pound. As a result, ferronickel contributed the largest share of revenues as its share increased to 49% from 30% in 2005. This is in line with the company's strategy to add value by moving away from selling raw materials and increasing the manufacture and sale of processed products. Increased ferronickel sales volume was mostly due to the new smelter FeNi III, which began producing export-quality nickel in April 2006, on a trial basis, after two and a half years of construction. Revenue from nickel ore increased by 28% to Rp 1,941 billion in 2006 from Rp 1,522 billion in 2005. The contribution of nickel ore, 87% of which was from high grade, dropped to second place with a revenue share of 35% compared to 46% in 2005. High grade nickel ore sales volume increased 12% to 3,375,466 wmt. Coupled with an increase in average price of 23% to US$ 54.74 per wet metric ton (wmt), revenues increased 28% to Rp 1,691 billion. A new nickel mine, Mornopo, located in North Maluku, which started operation in 2005, contributed significantly to the increase of high grade nickel ore volumes in 2006. Although low grade nickel ore sales volume decreased by 12% to 933,668 wmt, revenues increased 27% to Rp 250 billion due to a 54% increase in average prices to US$ 29.38 per wmt. Despite lower sales volumes of gold, which decreased 8% to 3,340 kg (117,815 oz) from 3,639 kg , gold revenues increased 18.5% to Rp 601 billion due to higher prices. The price of gold increased 37% to US$ 611.59 per troy ounce Noun 1. troy ounce - a unit of apothecary weight equal to 480 grains or one twelfth of a pound apothecaries' ounce, ounce troy unit - any of the unit of the troy system of weights in 2006. The bauxite division experienced a 5% decrease in sales volume to 1,536,542 wmt despite an increase in production. However, in view of 3% increase in selling price to US$ 13.60 per wmt, revenues from bauxite increased 3% to Rp 192 billion. Revenues from other products, namely silver, iron sands and precious metals refinery services recorded quite significant increases at 7.4%, 450% and 13% respectively. However, their contribution to overall revenues remained small at 1.3%, 0.2% and 0.3% for silver, iron sands and precious metals refinery services respectively. In 2005 the company's net income increased only by 3.9% in 2005, indicating a low profitability during the year. However, in 2006 due to the high price of most metallic mineral in the world including nikel and gold, Antam's net income increase by 85% while sales increased by 69%. It means Antam's profitability increased. Antam's operating expenses decreased 8% to Rp 298 billion, and accounted for 5% of Antam's revenues compared to 10% in 2005. The decrease was mainly due to lower general and administration expenses, which Antam decreased by 16% to Rp 255 billion. The largest contributor of this decrease was the absence of expenses related to the Early Retirement Program, which cost Rp 103 billion in 2005. Meanwhile, in line with efforts to boost productivity and efficiency, Antam increased training expenditures by almost 80% to Rp 12 billion. Antam's exploration expenses increased by 289% to Rp 31.59 billion in 2006 from Rp 8.13 billion in 2005 in line with the strategy to increase reserves. When Antam's cost of sales and operating expenses are combined, the rate of cost increase compared to last year was 45%, which was less than the 69% increase of net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight . Thus, Antam's operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. rose 115.5% to Rp 2,448 billion (US$ 271 million) resulting in an operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: which widened to 44% from 35%. Marketing Most of ANTAM's customers are long-term, loyal, blue chip companies, in North Asia North Asia or Northern Asia is a subregion of Asia. The most common definition of the term is;
n. 1. Act of taking off; specif., the taking off or purchase of goods. 2. Something taken off; a deduction. 3. A channel for taking away air or water; also, the point of beginning of such a channel; a take-off. agreements of 11 and 10 years, amounting to a combined annual total of 15,000 tons of ferronickel, with TKN TKN Total Kjeldahl Nitrogen TKN Takanini (suburb of Auckland, New Zealand) of Germany and Posco of Korea. All of ANTAM's nickel ore is exported to ferronickel producers and all of ANTAM's ferronickel is exported to stainless steel stainless steel: see steel. stainless steel Any of a family of alloy steels usually containing 10–30% chromium. The presence of chromium, together with low carbon content, gives remarkable resistance to corrosion and heat. producers. The bulk of ANTAM's gold and silver is sold to jewelry manufacturers, both locally and abroad. In 2005, as in 2004, two thirds of ANTAM's gold and refinery revenues were domestic. ANTAM's bauxite is sold entirely to China and Japan and iron sands are sold entirely to local cement producers. ANTAM's precious metal refinery serves domestic gold producers and is actively seeking new customers to boost its capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. . Although China has been a major source of demand growth in the past years, most of ANTAM's new customers have come from Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. . ANTAM began exporting nickel ore to FeniMak of Macedonia (for IMR/Alferon) and to Pobuzky in the Ukraine. In 2004, ANTAM began exporting nickel ore to Razno Imports of the Ukraine. ANTAM does not currently sell any nickel products to China, although it is considered a potential future market once FeNi III begins commercial operations. Currently ANTAM only exports bauxite to China, which has extended the life of the Kijang bauxite mine as the Chinese have been willing to accept a bauxite with a higher silica content. Joint Ventures Indonesia's mineral resource potential has always attracted many investors and strategic partners to make colaboration with ANTAM. With improving conditions in Indonesia, and stronger commodity markets, various parties have sought is in line with the company's strategy of sharing the risk and improving the likelihood of successfully exploring and developing ANTAM's vast resources, over 923,000 hectares of licensed mining areas. In 2005, ANTAM had 12 joint ventures, most of which were still at the exploration phase. However, some of ANTAM's joint ventures made significant progress, although there remained only one operational joint venture, PT Nusa Halmahera Minerals (NHM NHM Natural History Museum NHM Naturhistorisches Museum (Natural History Museum, Vienna, Austria) NHM Neurally Mediated Hypotension NHM New Horizon Media (Chennai, India publisher) ) in Gosowong, Halmahera Island. The progress made by ANTAM's joint ventures is a good indication of the improving development conditions of the Indonesian mining industry, which has been stagnant for many years. It appears solutions are being found to longstanding issues such as regional autonomy and pro-investment amendments were made to several laws, including forestry, mining and environmental. Due to the more favorable outlook for its joint ventures, ANTAM is considering making cash contributions to the more promising projects and to exercise options to increase its interest in these projects. While it is difficult to attribute any monetary value to ANTAM's interest in the joint ventures, except for PT NHM, due to current lack of forecastable cash flows, ANTAM views these joint ventures as having tremendous upside potential Upside potential The amount by which analysts or investors expect the price of a security may increase. upside potential The potential price or gain that may be expected in a security or in a security average, generally stated as the dollar .
Table-1
ANTAM's Proved and Probable Reserves *)
Commodity Ore Quantity
(000) wmt
Change
2004 2005 (%)
Saprolite Nickel 33,370 30,100 (10)
Limonite Nickel 12,400 18,450 49
Gold 4,468 3,220 (28)
Bauxite 60,710 33,900 (44)
Iron Sands 2,650 2,650 0
Commodity Estimated Estimated
Rate of Remaining
Annual Years With
Productio no Further
n (000 Exploration
wmt) **)
Saprolite Nickel 3,500 9
Limonite Nickel 1,500 12
Gold 400 8
Bauxite 1,000 34
Iron Sands 500 5
*) Based on the Competent Person's Report. Figures as per December 31,
2005 (Does not include inferred resources).
**) This is estimation and is not meant to suggest with certainty the
mine life of ANTAM's operations, which may have longer or shorter
duration.
Table-2
Antam's Sales Value, 2004-2006
Products/ 2004 2005 2006
Services Sales Sales Sales
(R Bill.) (R Bill.) (R Bill.)
Nickel ore 1,195 1,522 1,941
Ferronickel 971 986 2,731
Gold 457 507 601
Bauxite 135 187 192
Silver 50 68 73
Iron sands/other 31 2 11
Others (including 20 15 17
precious metals
refinery)
Antam 2,859 3,287 5,566
Products/ 2006 Share of
Services Growth Revenues
% 2005 2006
Nickel ore 27.5 46 35
Ferronickel 176.9 30 49
Gold 18.5 15.5 10.8
Bauxite 2.7 6 3.4
Silver 7.4 2 1.3
Iron sands/other 450 0.1 0.2
Others (including 13.3 0.4 0.3
precious metals
refinery)
Antam 100 100
Source: Antam's Annual Report
Table-3
Antam's Sales Volume,
2005-2006
Product/ Sales volume Sales volume 2006
Service 2005 2006 Growth
(%)
High grade 3,025,841 3,375,466 11.55
nickel ore (wmt)
Low grade 1,060,240 933,668 -11.93
nickel ore (wmt)
Ferronickel 6,988 13,389 91.60
(TNi)
Gold (kg) 3,639 3,340 -8.22
Silver (kg) 29,823 21,063 -29.37
Bauxite (wmt) 1,617,566 1,536,542 -5.00
Source: Antam's Annual Report
Table-4
Antam's Brief Financial Report,
2004-2006
2004 2005 2006
(Audited) (Audited) (Unaudited)
Sales 2858 3287 5566
COGs 1498 1827 2820
Operating expenses 264 324 298
Operating profit 1097 1136 2448
Net income 810 842 1559
Net operating cash flow 764 791 1446
Capital expenditure 1364 1311 127
Free cash flow 600 520 1320
Comparison
(%)
05/04 06/05
Sales 15 69
COGs 22 54
Operating expenses 23 -8
Operating profit 4 115
Net income 4 85
Net operating cash flow 4 83
Capital expenditure -4 90
Free cash flow n.a n.a
Source: Antam's Annual Report
Table-5
PT ANTAM's Customers
Products Customer Name--Country
Saprolite Gokokai/Pamco (via Mitsubishi), Sumitomo Metals
Mining Co. (via Mitsui), Nippon Yakin Kogyo (via
Marubeni)--Japan
Raznoimports, FeniMak (for IMR/Alferon, Pobuzky
--Europe
Limonite Queensland Nickel Pty Ltd.--Australia
Ferronickel Via Avarus AG (ANTAM's agent in Europe):
Thyssen Krupp Nirosta, AvestaPolarit, ALZ BV,
Pohang Iron & Steel Co. (Posco)--Korea
Nikkinko Trading, Atmix (via Mitsubishi), Nisshin
Steel, Nippon Yakin Kogyo (via Marubeni)--Japan
Yieh United Steel--Taiwan
Gold Standard Bank--United Kingdom
Various local jewelers--Indonesia
Silver AGR Mathey
Yamamory
Various local jewelers--Indonesia
Precious Metal PT Newmont Minahasa Raya, PT Indo Muro
Refining Kencana, PT Nusa Halmahera Minerals-
Indonesia
Bauxite Nippon Light Metals, Showa Denko, Sumitomo
Chemical--Japan
Shangdong Aluminium, Shangdong Xinfa--China
Source: PT ANTAM
Table-6
PT ANTAM's Promising Joint Ventures
Joint Pro- KP/KW
Ventures Location duct or COW
PT Nusa Gosowong, Gold KW96P
Halmahera Halmahera K0178
Minerals (1) Island, Maluku
PT Cibaliung Cibaliung, Gold KW96P
Sjmberdaya West Java P0019
PT Sorikmas Kotanopan Gold KW96P
Mining (1) and Pagar K0042
Gunung,
Sumatra
PT Gag Nikel Gag Island, KW96P
(1) Papua Nickel K0053
PT Weda Bay Weda Bay, Nickel KW96P
Nickel (1) Halmahera K0016
Island, Maluku
PT Dairi Dairi-Karo, Lead/Z KW99P
Prima North Sumatra inc K0071
Minerals
PT Galuh Martapura, Diamo KW96P
Cempaka (1) Cempaka, nds K0069
Danau Seran,
Kalimantan
PT Pelsart Gendang Gold KW96P
Tambang Timburu, K0105
Kencana (1) South
Kalimantan
PT Straits Garut, West Gold 540/107
Consultancy Java 8/SDAP/
Services (2) 2,002
503/365
6/DPSD
A8P
540/01-
KP.DLH/
2003
Joint Area ANTAM Joint
Ventures (Ha) Share Venture
Location
PT Nusa 29,620 17.50 Newcrest
Halmahera (ASX
Minerals (1) Listed)
PT Cibaliung 16,590 10.25 Austindo
Sjmberdaya (ASX
Listed)
PT Sorikmas 66,200 20.00 Oropa
Mining (1) (ASX
Listed)
PT Gag Nikel BHP
(1) 13,136 25.00 Biliton
(LSE/ASX
Listed)
PT Weda Bay 76,280 10.00 Weda Bay
Nickel (1) Minerals
(TSE
Listed)
PT Dairi 27,420 20.00 Herald
Prima Resources
Minerals (ASX
Listed)
PT Galuh 3,920 20.00 BDI Mining
Cempaka (1) Corp.
(LSE/AIM
Listed)
PT Pelsart 201,000 n.a. n.a.
Tambang
Kencana (1)
PT Straits n.a. n.a. n.a.
Consultancy
Services (2)
Notes: (1) These joint ventures have been granted COWs;
(2) These joint ventures have been issued KPs or MA
(Mining Authorization)
Source: PT ANTAM's Annual Report
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