Three large mining companies will hold an initial public offering (IPO) of shares with a target of raising US$ 1.5 billion or Rp 22 trillion this year. They are PT Merdeka Battery Materials (MBM), PT Amman Mineral Internasional (AMI), and the Harita Group business unit in the nickel sector. Based on a research report by JP Morgan, a global financial services company, the IPOs of the three companies' shares had a positive impact on the Indonesian stock market. In addition, investors have more options to invest in nickel stocks outside of the old players, namely PT Vale Indonesia Tbk (INCO), PT Merdeka Copper Gold Tbk (MDKA), and PT Aneka Tambang Tbk (Antam/ANTM).
Moreover, JP Morgan noted, the performance of INCO, ANTM, and MDKA shares was below the Indonesia Stock Exchange's (IDX) composite stock price index (IHSG) ranging from 4-16% in the last month. There are two triggers, namely the correction in metal prices and investors preparing large funds to gobble up stocks that will enter the stock exchange. "Beyond that, the valuation of MDKA shares is already high, with a 2023 PER of 30 times, while ANTM shares are selling at a PER of 2023 of 12 times, close to the regional average," wrote JP Morgan, quoted Monday (6/3/2023) . Based on Investor Daily records, MBM is the largest nickel mining company in Indonesia. MBM holds a 51% stake in PT Sulawesi Cahaya Mineral (SCM), which has Indonesia's largest nickel resources of 1.1 billion tonnes. Of that amount, 69% is limonite, while 31% is saprolite.
MBM also owns 50.1% of the shares of three nickel pig iron (NPI) smelters, namely PT Cahaya Smelter Indonesia (CSI), PT Bukit Smelter Indonesia (BSI), and PT Zhao Hui Nickel (ZHN), then 80% of the acid project. ferrous metals (AIM), and 32% shares of Indonesia Konawe Industrial Park (IKIP), an industrial area (KI) built at the SCM mine. MBM plans to build two high pressure leach acid (HPAL) projects that produce mixed hydroxide precipitate (MHP) with a capacity of 120 thousand tonnes of MHP per year at IKIP. His partners are two big players, Tsingshan and Huayou. Meanwhile, DBS noted, Amman Mineral is a world-class producer of copper and gold. According to the Wood Mackenzie report on 13 May 2022, AMI's Batu Hijau mine is ranked second in Indonesia.
"Combined with the Elang deposit, AMI has the fifth largest copper reserve in the world," wrote DBS in its research. The associated company PT Medco Energi Internasional Tbk (MEDC) encourages low-cost mining to support revenue. The Batu Hijau mine is expected to be one of the lowest cost copper mines in the world by 2023. “Low cost mining operations will secure AMI profitability with an EBITDA margin of above 60% going forward,” wrote DBS. DBS estimates the fair value of AMI is around US$ 9.1-10.9 billion, based on a combined 2023 EV/EBITDA valuation of 5.9 times and 2023 PER of 11 times. With such a large EV/EBITDA, AMI's valuation is around US$ 9.1-9.7 billion, while with 11 times PER, AMI's valuation is around US$ 9.4-10.9 billion.
Meanwhile, CLSA projects AMI's valuation to be around US$ 8.5-12.2 billion. AMI risks include price volatility of copper or gold, state export ban regulations arising from any change in concession granting by the government, as well as operational risks of open pit mining and tailings or waste mining. Previously, AMNT External Communications Manager Ananta Wise was reluctant to comment on the IPO plan. “Thank you for the question. We cannot provide further information regarding this matter," he said. Merdeka Copper Gold Corporate Secretary Adi Adriansyah Sjoekri also could not be asked for confirmation regarding MBM's IPO plan.
