the mining industry in indonesia - iabciabc.or.id/download/conference2015/colinjdavies.pdf · the...
TRANSCRIPT
J Resources – September 2011
The Mining Industry in Indonesia
All that glitters is not necessarily gold…
IABC, Business As Usual?
YOGYAKARTA
Colin J Davies
17th November, 2015
J Resources – September 2011
Today’s outline
J Resources – November 2015
2. The Gold Industry
1. Global Mining Business
3. J Resources Profile
4. Our story so far…
5. The challenges!
6. In conclusion
# 2
J Resources – September 2011
1. Global Mining Business
J Resources – November 2015 # 3
Penjom Gold Mine, Malaysia
J Resources – September 2011
Global mining by scale
J Resources – November 2015
The US$2 trillion mining value chain…
# 4
Global mining in context
J Resources – November 2015
Industry comparisons…
Companies by Market Capitalization
Apple US$ 670B
Exxon-Mobil US$ 400B
Microsoft US$ 400B
Google US$ 370B
Berkshire US$ 350B
Wal-Mart US$ 275B
Facebook US$ 200B
Coca Cola US$ 190B
Bank of America US$ 180B
All Gold Miners US$ 135B
# 5
Mining comparisons…
Industry by Market Capitalization
Gold Industry US$ 135B
Copper Industry US$ 130B
Iron ore (sea) US$ 100B
Bauxite (alumina) US$ 90B
Thermal coal (sea) US$ 70B
Met coal (sea) US$ 50B
Potash industry US$ 40B
Nickel industry US$ 20B
Silver industry US$ 20B
PGM industry US$ 15B
Diamonds US$ 12B
---------------------------------------------------------------
GOLD/COIN/OIL-SHEET NEWS November 6, 2015
---------------------------------------------------------------
12/31/14 YTD Last Week This Week Change Percent
---------------------------------------------------------------
1831.50 -18.6% Aluminum 1447.50 1491.50 44.00 3.0%
6359.00 -21.4% Copper 5135.50 5000.00 -135.50 -2.6%
1853.00 -11.5% Lead 1681.00 1639.00 -42.00 -2.5%
14935.00 -34.9% Nickel 10135.00 9725.00 -410.00 -4.0%
19500.00 -24.6% Tin 15025.00 14710.00 -315.00 -2.1%
2167.00 -24.9% Zinc 1673.00 1627.00 -46.00 -2.7%
---------------------------------------------------------------
1182.90 -7.9% Gold 1141.70 1089.40 -52.30 -4.6%
796.90 -21.9% Palladium 676.15 622.10 -54.05 -8.0%
1208.80 -22.2% Platinum 984.90 940.90 -44.00 -4.5%
15.69 -6.1% Silver 15.54 14.74 -0.80 -5.1%
---------------------------------------------------------------
Global metal prices
J Resources – November 2015
Reference = Goldsheet (Bob Johnson)
W45 / Commodity prices
# 6
2. The Gold Industry
J Resources – November 2015 # 7
Franked Gold Bullion Bars
Gold price history
3-Year
Range
J Resources – November 2015 # 8
Gold peer comparison
J Resources – November 2015 # 9
# COMPANY 2012 2013 2014 H1-15a H2-15e 2015e
- FREEPORT* 862,000 1,142,000 1,130,000 615,000 585,000 1,200,000
- NEWMONT** 68,000 48,000 76,000 288,000 312,000 600,000
1 G-Resources 47,858 281,477 275,515 156,316 123,684 280,000
2 Newcrest*** 341,054 225,461 247,252 148,061 114,439 262,500
3 J Resources 45,111 30,322 173,374 108,373 95,835 204,208
4 AnTam 163,942 157,525 157,457 84,944 72,556 157,500
5 Rajawali 131,414 150,603 147,048 65,027 59,973 125,000
6 Gajah Tunggal 4,726 50,605 68,771 38,517 41,483 80,000
7 Kingsrose 23,361 4,841 13,225 12,172 17,828 30,000
8 Sumatra C&G 0 0 0 0 3,000 3,000
- Straits Resources 28,681 21,707 0 0 0 0
^ TOTAL Au (oz) 1,716,147 2,112,541 2,288,642 1,516,410 1,425,798 2,942,208
Freeport & Newmont production data is recorded as 100% as gold output is a by-product of a copper mining business.
*Note: Freeport & subsidiaries owns 90.64% of the CoW output and the Government of Indonesia (9.36%).
**Note: Newmont owns 56% of the CoW output, MDB/Local Govt. (24%), Meruhk Enterprises (17.8%) & others (2.2%).
***Note: Newcrest owns 75% of Gosowong output, the balance is owned by PT Aneka Tambang (25%).
Indonesia – gold producers
Gold peer locations
J Resources – November 2015 # 10
Jakarta Grasberg
Major copper (gold) mines
J Resources gold mines
LEGEND
The paucity of operating gold (and copper) mines is directly related to investment conditions…
Gold mines (active)
Batu Hijau
Singapore
Toka Tindung
Gosowong
Martabe
Tembang
Natarang
Mirah
Cibaliung
Pongkor
J Resources gold projects
J Resources – September 2011
3. J Resources Profile
J Resources – November 2015 # 11
Picture Text, Indonesia
3D Model, Penjom, Malaysia
Bakan Gold Mine, Indonesia
J Resources – September 2011
Corporate structure
J Resources – November 2015 # 12
J Resources
Mining Limited Public Shareholders
92.60% 7.40%
80% 80% 100% 99.8% 99.5% 99.9%
PT J Resources Nusantara (JRN)
PT J Resources Asia Pasifik (JRAP) Other investors
98.87% 1.13%
MC’s & ML’s 6th Generation Contract of Work IUP IUP 5th Gen Contract of Work
North Lanut Bakan Seruyung Doup Pani, Bulagidun,
Bolangitang Penjom
J & Partners
100%
<-- MALAYSIA --> INDONESIA
PT J Resources Bolaang
Mongondow
PT Sago Prima
Pratama
PT Arafura
Surya Mining
PT Gorontalo
Sejahtera Mining
J Resources
Gold (UK) Ltd
J Resources – September 2011
Corporate portfolio
J Resources – November 2015 # 13
Jakarta Office
Kuala Lumpur Office
PENJOM (100% owned) • Opened Dec 1996
• Reserve: 668Koz
• Resource: 1.23Moz
• Processing: VAT Leach
• Former Avocet discovery
BAKAN (80% owned) • Opened: Dec 2013
• Reserve: 652Koz
• Resource: 1.10Moz
• Processing: Heap Leach
• Ex Newmont asset
N. LANUT (80% owned) • Opened: Sep 2004
• Reserve: 174Koz Au
• Resource: 512Koz Au
• Processing: Heap Leach
• Ex Newmont asset
SERUYUNG • Opened: Jan 2014
• Reserve: 321Koz
• Resource: 422Koz
• Processing: Heap Leach
• Ex Indochina Goldfields asset
PANI • Development Project
• Target Resource: 4.50Moz
• Target Reserve: 2.00Moz
• Ex BHP asset
Legacy producing assets
New production assets
Exploration assets
LEGEND
Properties
Regional Office
BOLANGITANG • Exploration Project
• Gold & Silver
• Ex BHP asset
BULAGIDUN
• Exploration Project
• Gold & Copper
• Ex BHP asset
DOUP • Development Project
• Target Resource: 1.60Moz
• Target Reserve: 750Koz
• Ex Placer-Dome asset
A diverse and balanced portfolio with producing operations and prospective resources
Development assets
J Resources – September 2011
Corporate inventory
J Resources – November 2015 # 14
Project Koz
Jun-11
% of
Total
Koz
Dec-14
% of
Total
Penjom 398 84% 668 37%
Bakan - - 652 36%
Seruyung - - 321 18%
N. Lanut 76 16% 174 10%
Total 474 100% 1,815 100%
Project Koz
Jun-11
% of
Total
Koz
Dec-14
% of
Total
Doup 725 27% 1,369 27%
Penjom 1,180 44% 1,358 26%
Bakan 415 16% 1,104 21%
N. Lanut 354 13% 512 10%
Seruyung - - 422 8%
Pani - - 379 7%
Total 2,674 100% 5,144 100%
Gold Reserves Gold Resources
Project Pipeline
Bolangitang
Bulagidun
North Lanut
Bakan Penjom
Seruyung Pani
Doup
Generative Exploration Development Production
- 2 years Current - 4 years - 6 years
J Resources – September 2011
4. Our story so far…
J Resources – November 2015 # 15
Native Gold, Penjom, Malaysia
J Resources – September 2011
Our event timeline
J Resources – November 2015 # 16
2014 – PRODUCTION YEAR
Reserves = 1,815 Koz Au
Resources = 5,144 Koz Au
2012 – CONSOLIDATION YEAR
4 Years
2011 – ESTABLISHMENT YEAR
Reserves = 474 Koz Au
Resources = 2,674 Koz Au
2013 – DEVELOPMENT YEAR
2015 – The YEAR
of SUSTAINABILITY
J Resources – September 2011
Our milestones
J Resources – November 2015
The first 4 years…
# 17
2014
2013 2012
2011
Bakan, our 1st gold mine .
Secured $275 million loan .
Signatory to ICMI code .
Added 0.5Moz in resources .
Gold output = 67Koz .
• Identified Avocet as target
• Won the tender process
• Strong field of players
• Inherited 2 legacy mines
• Gold output = 40Koz
timeline
#1 National gold producer .
50% increase in reserves .
Added 1Moz in resources .
Projects @ JORC (2012) .
Gold output = 223Koz .
• Listed JRAP on the IDX
• Optimized the legacy mines
• FS/Amdal on 2 new mines
• Added 1Moz in resources
• Gold output = 101Koz
Trading commences! Bakan Opens
Seruyung Opens
We enter the gold business…
J Resources – September 2011
2015 to date…
J Resources – November 2015 # 18
Where are we today?
Mkt. Cap. = US$ 550M @ Rp1,415/share @ 13,600 Rp/US$
52w Range = US$640M (Rp1,645/share @ high) / US$196M (Rp505/share @ low)
2014 Sales = 223,000oz Au @ sales cost = 1,260 US$/oz & cash cost = 720 US$/oz
EBITDA = US$100M if a gross margin of 500 US$/oz is maintained on 200Koz…
But every +/-5 US$/oz shift in the gold price affects our bottom line by US$1 million.
2014 R&R = 5.15Moz Au [M+I+I] resources containing 1.82Moz Au [P+P] reserves
New Reserves = 0.61Moz increased by 50% at a cost of US$ 12 million
New Resources = 1.01Moz increased by 25% at a cost of another US$ 12 million
Each reserve ounce is valued @ 300 US$/oz but our conversion cost = 20 US$/oz.
Each resource ounce is valued @ 100 US$/oz but our discovery cost = 10 US$/oz.
So is there a sustainable future in gold in Indonesia?
J Resources – September 2011
5. The challenges!
J Resources – November 2015 # 19
Picture Text, Indonesia
3D Model, Penjom, Malaysia Frankly, its all about balance…
Seruyung Gold Mine, Indonesia
J Resources – September 2011
#1 - Mining is a cyclical world…
J Resources – November 2015
CRASH
BOOM
Company Liquidations
Declining Exploration
DOWNTURN
Mergers
Cash Takeovers
Major IPO’s
UPTURN
Paper Takeovers
Rising Exploration
Junior IPO’s
# 20
J Resources – September 2011
#2 - Indonesia’s global competition
J Resources – November 2015
Fraser Institute Survey / Mineral Potential Index (MPI)
# 21
# Top 5 MPI
1 Alaska 83.30
2 Australia (WA) 82.00
3 USA (Nevada) 81.80
4 Chile 80.30
5 Canada (British Columbia) 79.65
# Bottom 5 MPI
108 Saudi Arabia 33.30
109 Honduras 32.35
110 French Guiana 24.95
111 Niger 18.80
112 Uruguay 7.70
# Australasian* Placements MPI
2 Australia (WA) 82.00
6 Philippines 79.63
12 Papua New Guinea 77.15
20 Indonesia 72.75
34 Australia (average) 66.41
39 China 62.95
44 Myanmar 61.60
51 Mongolia 59.40
72 Malaysia 53.35
91 Vietnam 47.25
96 Laos 43.35
98 Thailand 40.95
*Note: Cambodia not surveyed
J Resources – September 2011
#3 – Indonesia’s problem areas
J Resources – November 2015
The regulatory marathon…
Legal Uncertainty
Mining Law
New applications
Clear & Clean (C&C) list
CoW conversions
Government Decisions
Central v Regional issues
Implementation regulations
Export restrictions
DMO obligations
Forestry Impediments
National Parks
Protected Forests
Moratoriums
# 22
The J Resources experience…
Legal Uncertainty
Commercial vacuum
Still not possible…
None, no conflicts for us
Pending negotiations…
Commercial Interference
Confusion reigns!
Still waiting patiently…
None, occurs onshore
None, not required
Forestry Impediments
Boundaries are movable…
Problematic, inconsistent rules
A never ending story!
J Resources – September 2011
6. In conclusion
J Resources – November 2015 # 23
Picture Text, Indonesia
3D Model, Penjom, Malaysia Frankly, its all about balance…
J Resources – September 2011
Some practical advice
J Resources – November 2015 # 24
Mining is a long-term business
Those looking for a short-tem mining investment in Indonesia will surely fail;
Those looking for a short-term exploration play in Indonesia will almost certainly fail;
Build and maintain a multi-project pipeline – you must develop a 10-15 year horizon;
You need reserves not resources! M+I resources will only deliver 40% recoverable.
Start simple and build up your knowledge
Epithermal deposits are much easier to mine than orogenic – take HS over LS initially;
Leach processing technology is cheap & efficient – study the static v dynamic approach;
Progress from oxide to sulphide mines in a controlled manner – different skills required;
Grade is king, respect it… only with volume can you commit to lower grades.
Recognize your financial limitations
Mining is expensive, you need access to capital and the trust of your financial partners;
Bank debt is a poor choice for mining finance – consider mineral streaming alternatives;
No mine costs less than US$100 million – be ready for that fact and cost overruns!
J Resources – September 2011
Terima Kasih…
PT J Resources Asia Pasifik Tbk.
Equity Tower, 48th Floor - SCBD, Lot 9
Jl. Jend. Sudirman, Kav.52-53
JAKARTA, 12190
T +62 (21) 515-3335
F +62 (21) 515-1510
www.jresources.com