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    Indonesia Mine

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    9 views109 pages

    MineIndonesia

    Uploaded by

    Fendiaz Ramadhian
    Indonesia Mine

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    | mineIndonesia 2013 May 2013 Contents ASDSIAS| PERTAMBANGAN BATUBARA INDONES\A INDONESIAN MINING ASSOCIATION - IMA, INDONESIAN COAL MINING ASSOCIATION - ICMA. Jakarta, $0 April 2013 ot pleasure to present the eleventh PwC Indonesia repost on trends in the Indonesian mining industry, mineindonesia 2023, On behalf of IMA, ICMA and the mining industry, we congratulate PwC Indonesia and thank them for their continued comm.tment and support to the industry, We would also like to thank those companies that contributed te the survey to ethance public understanding a” the industry and further the process of cunsizucive engegenentwith stakebold: ‘The mining indusity is important to Indozesia. 1: is a substantial provider of export earnings, econemic activity and employment, anc supports regional development, ‘The Industry isa an important stage of ts development with the changes since :he passing »f the Law an Mineral arid Coal Mining (Law No. 4/2009) in 2009, and the associated challenges tt brought. We hope that all stakeholders in the Indonesian mining. industry can work together te meet the challenges faced by the indusiry, and continue to contribute to the growel: of lndunesia IMA and ICMA continue to work with their members, the government and other parties towards achieving the best regulatory environment :o p:omote further expbration and investment in the mining industry. ‘We believe that by having this cooperation, we can consistently improve the investment climate in the Indone an mining industry. Mien Martiono Hadianto Bob Kamandanu Chairmar Chairman Indonesion Mining Association Indonesian Coal Mining Association This page intentionally left blank Se Sevcsth annual review of trends in the Indonesian mining indusiry, minetndonesia ‘Sefesction with the Indonesian Mining Assceiation and the Indonesian Goel M ni SSepened the Indonesian mining industry over the years through the. Srehensive analyss of the financial performance of the industry, and most ‘contribution to the economic growth of Indonesia. We hepe to continue this ears come See 2011 presented in this report isbased on the results of a confident al, -gecsSonnaire circulated to both producing ard exploration companies that kad We Seve eusmented this informaion with the latest puly idly available fi-rauctal pesculasly for those companies listed on the Indenes a Stock Exchange, or whose © Se Sancial statements 0° parent companies ‘sted on the Indonesiar or overseas Sy years of changing fortines, 2011 saw higher arices for mining commodities = 2008 as a result of the global economic downturn, with slow price recovery ‘The peice recovery, triggered by sustained demand from emerging ceonomics, Sethe mining industry to recognisea significant increase in financial perlormmanee. problems in the Eurozone during 2011 led to another round of global economic Somes commodity prices [rom 2012, This has resulted ina significant drop-off in the ‘Sees companies. ce bas been driven by commocity prices and globel economic difficulties, the ‘Seeste of Indonesia's mining industry is heavily dependent on the attractiveness ed resolution of thecha lenges arising from the Lav on Mineral and Ceal 6 sebsequent implementing regulations. This consideration should be at the Spetiatives and governmert pelicy-setting going forward. €-Se report informative, and we thank all those who took the time to contetbute to Ali Mardi Partner, Energy, Utilities & Mining Pwe Indonesia tilities & Mining € summary were definite'y years of clanging forunes. 2011 saw higher prices for mining commodities ster the significent fall-off in 2008 as a result of theglobal economic downturn, with slow atic® rerovery nmencing in 2005, The price recovery, triggered by sustained demand fom emerging economies ovirted the foundation for the mining, industryto reengnise a significant inerease in financial performances. However, further eccnomic problems in the Eurozore during 2C11 led to another round of global economic uncertainty resulting in lower commodity prices from 2012. This hes resulted in a significant drop-off in the nancial performance of mining eomparies vestor confidence in the mining sectorhas been very negative both in Indonesia, and around the world, as nessed by the erosion in market capiralisition of ining companies on both me-national beurses and the jan exchange {et capitalisation of mining companies on the Indonesta Stock Exchanige slipped by 299% in 2011. Thisdowuwand weuid Loutinued in 2012 witha 26% decline frou 2021, aud ain in thse first qua ves 2013. The total market capitalisetion of the main listed minirg companies fe | from US$ 31.6 billion (or illion; at 31 December 2612 to USS 30.3 billion (or Rp 294.5 trillion) at 31 March 2013, This » a significant increase of 36% in matket capitalisation for the Indonestan stock market as a whole to March 20 won Mineral and C uanee of the L al Mining in early 2009 (“Law No. 4/2009"), the fovernment 4 various jegulativss ia wider w piovide cleares guidance w invesives inthe Lidouesiau miniag esry. However, coneerns argund the impact of t1e new regulations issued during 2711 and 2012 have . vestors have not ye: been will ¢ increase their exposure to the Indonesian mining sector. ott, while the current economie elim provides both opportunities and ne minting industzy, che key concern for investors is uncertainty around government 2 mplementatior of those regulations, Despite the cleatly stated view tat Indenesia has spestivity, uncertainty around nvestmest eturns due to the uncertain regulatory Indonesia sability » attrac: new investment. se chal price hy approximerely 29% in 2011 compatmced hy the increase in prndncrion SP See 210, resulted in survey responcents reporting a 92% inerease in net profit for coal companies 2 uation was reversed :n 2012, The increase in production level by 9% was not able to recoup ease in average coal price by 19%. “This h otheraccounting adjustmenis made by several ant diop in net income by 64%, as reported by listed coal mining jogether w ed ira sign’ different story. Thegeneral inereass in average mineral prices dhuring 2011 was not enough to offset he significant decline in production excluding tin ranging from 9% to 36%), resulting in lower aggregate net protits in 2011 by 33%, The reverse se for 2012, but still resulted in lower profits, 2012 saw a sigrificant decrease in mineral prices (except bus higher levels of production by 3% to 69% restlting in 2012 profits reported by listed slipping by 61% companies recarded s notble 62%) decrease in net profits divsing 2012 me Kerprott al eotepaies m0 fmm Ke profit alllised S000 50% companies 3040 ON fhe Renn en average Soni: sali share fume (8) a ‘all companies ‘ ee Renan on average Pat Ns oe shiarebulders tunds (¥%~) - es reas ‘fe all a 2601 2005 240} 2604 4005 Bb; 2007 HIF aH The results for Indonesiat miners ia 2611 are generally stil above the global average, based on results for the top 40 global mining cempanies by macket capitalisation, as set out in PwC's review of global :rends in the misting industry. ‘The profitability of Indonesian mines wes greater than the globe! 40, due to the simpler cost structures, and relurively low saareholders’ funds and capital employed. As such, Indonesia cutperformed the global 40 n 2011 on measures of return on shareholders’ funds and returnon eapital employed, However witt the senficant drop in she financial performance of Indonesian miners in 2012, as represented by the financial performance of listed mining companies, i-will be very interesting to see the comparison with the global everage ‘or 2012 which ‘snot yeravailable as this report gors piess. What is cleat isthat both globally, and in Indonesia, miners are struggling to maintain investor returns in a low commeddity price and increasing cost environment, see page 11) xpectation of increase in horl domestic and global demand will result in som hat higher priees un 2013 and going forward I) theinsrsy pastietpcens gensrily Belleve slat Goitrdomestioandd sobal desiaud for coal and mineral products will nerease moderately in 2013 and inthe shore re medium term, Thesurvey pariipants geaorslly believe that, except for tin and copper, the price of mining procucts (ccal, tickel and gold} will continue to increase over the next three years, (see page 25) ‘Consistent with previous years, interxational surveys of mining companies Continue to rank Indonesia highly = terms of mineral prospectivity, however a'sessments of its mineral policies and investment climace are not Seecrable and are even deteriorating. The most recent Fraser Institite survey ranked Indonesia the lewest out ‘35 countries fer its policy potential index". ‘Seovey respondents reported investment spending in 2011 of approximately USE 3 billion (increase trom US$ ‘LS billion in 2010). Governmen: data also shows a positive trend in 2012 with a further increase in investment speacing inthe Indonesian mining sector, Nevertheless. thisis still a very small proportion of global investment “She Sing sector (approximately 2%) and centairly nor consistent with the very positive views of Indonesia’s seslosaal porential. ‘ee SSS date for Indonesia also continuesto show minimal investment in greenfields exploration, and that ‘Ge ether vestrent spendirg ismainly for replacement plant and equisment to maintain or expard existing, spesssccs. Irmust be said thar the low level of greenfields exploration activity isa significont threat tothe Sener success of the industry and may adversely affect the furure growta of the Indonesian economy, An ‘SSese Saaploration, discevery and development of new depesitsis essential to suseain the industry over the SSeS Sm Without substa.tial greenfield exporaion in the coming years, we are unlikely to see significant gee === Cevelooments in Indonesia, otherthan forexisting known deposits "Se severe! pears, Law No. 4/2009 and its implementirg regulations do not appea to de enough to spur SgenGecest exploration investment. There were no significant new'areas opened for mining activities during Qe Se D2 The other important faccor during this period was the uncertainty of the global economic “settee a = result of the Furozone problems and a slow-dawn in emerging markets, such as Caine, which geet Sercses cw focus more on existing mine development and increasing capacity rather than greenfield — ae ‘parcipants reported 17 key issues that tiey are currently facing in the Indonesian mining sector. shat these isiues continue to impac: the level of investment in the Indonesian mining sector SSmediate attention. The survey participants also indicated thet they do not expect significant oecth respect to these key issues over the next five years — this isa signiffeant coneern for both the sand che government, generally incicated thatthe level of competitiveness of the Indones:an mining sector is veth other mining countries. Only geological attractiveness is seen as @ competitive factor fer ‘Geher factors such asa trained workiorce, pelitical stability, cnvironmertal regulations, fiscal Sstasructure, foreign ownership rules and she -egulatery framework in genersl are raaked either ec lower than neutral, tani 55) Moe striving; inelaest 0 ‘The mining industry's contribution to the ovecall Indonesian “conomy continued to increase in 2011 and 20:2 ‘The m.ning sector accounted for approximately 5% 16 6% of total Indonesian 2011 and 2012. GD?, and more than 17% of export revenues (source: hank Indonesia). ‘The contribution to government (n the form of texaton and non-tax revenue) is significant, and continues to increase. Survey respondents recorded an increase of 15% incortributions to goverament in 2011 (in line with increased profts, particularly for coal), Government dat: fornon-tax state revenue (predottinantly royalties) in 2012 indicaces ¢ drop-off from 2017, consistent with the decrease in mining company -evenues for 2012 as illustreted by listed mining companies. Data on ectuel raz receipts from the mining sector in 2012 ate not yet available, but arc expected to follow tae same patter as for non-tax state reventue. that is a signific from 2011 (source: Ministry of Energy and Mineral Resources). at decline ‘The industry also continues to make signiteant contr butonsto regicnal and community develooment— Rp 1.5 trillion (or USS 198.5 million) in 2011 based on survey respondents. The survey participants generally indicated that they are expecting to inerease the spending an contrbutionsto regional and community develooment. On top of this, further Rp 1.5 trillion (or US$ 161 millien) in spending on eavironmental reclamation, mine and environmental control activities was reported by survey sespondeuts fot 2011 The total number of diett emoloyees increased by 9% to app:oximately 47,970 in 2011. Employee compensation has however increased significantly in 2011 (by appreximately 25% oversll) due to ircreased benefits received 28 aa result of incraased profits and production, Gives the impac: of -he global economie downturn on the mining incustry, there is a risk that employment end salariesin the sector mey come under presstirein the coming vears in line with likely decreases in production ané profitability. The survey participazts indicated that even ‘hough it is widely expected that tere wil be some decreasein the level of employment in the Indonesian mining sect generally they expect employrient levels to be maintained in the near future. The total economic berefic to Indonesia is significantly greater than the direct benefits captured by the survey ‘This is because of the indirect mutter effec: that the mmning industry's dircet contribution has on other ‘economic activity, which is particularly notable in the reg onel and remote areas where te industry operates Often the mining company is the most significantemployer and contributor to community development in the areas iu which it operates. (see pages 29,47, 51) ke sii dewolup During 2071 and 2012, the government issued severa’ new mining sector regulations, such as divestment requirements for IUP Folders, an export ban on unprccessed minerals and in-country processing requirements. The government isnow also in the precess of Consrac: of Work and Goal Contract of Wors re-negotiatians to bring them more into line with the terms of Mining Law No, 4/2009, The survey parvicipants senerally indicated that the curzert developments in the regulatory framework result in this sector becoming less attractive :o new fnnvesters. Despite not being satisfed with the Current regulatory tegime and level of return to shareholders, existing operators appear willing to centirue opetatirg in indonesia and generally do ne: have an int to leave Indonesia. This may be due to the anticipation of survey participants that there will be a moderate improvement in the reguletory framework for the miring sector over the medium to long term; or indeed an expectation that global commodity pres will return vo previous hights: or simply duc to the large investments that have already been made. Highlights for 2011 and 2012 Highlights for 2011 and 2012 The avetage price of coal and arinerals continued:o increase until 2011 after the rebound from the 2008 mic crisis. However. this trend wasreversed in 2012 (except for god) asa result of another round of nomic difficulties ia the Euro zone. Gold has continued its increase over the last five years, bucking the for other commodities, given its safe haven status in times of economic trouble, There has bee some werent i coal and mineral driees « be first quarter of 2013, excep! for gold which has begun to + 2011 revenues surged by 18% but net profit only increased by 19%, The decline deepened in 2012, as listed ining companies exhibited decreases in revenucand ne: profits of 9 and 69%, respectively. It needs fivied that dhe net profits of listed miating cumpenies stay be impacted Ly nonrnining activ.ties aid sccourting charges, but the overal downward trend providesan indication of the overal performance of the industry in 201 - ‘egate net provits of coal companivs increased by 9206 in 2013, in stark contrast to mineral companies ich booked a decrease in net profits of 33%. - 1) of sharehclders’ funds decreased fo 34% in 201 1, compared to-44% in 2010. Irfell further to 12% 2 4 on listed mining company performance, - Juction has coritinued to inctease year-on-year since 2007. Copper end gold production decreased eit O11, burrecovered in 2012. Nickel producticn atively flat during 2011 and 2012, ‘Tin peaduction increased significantly during 2011 and 2012, after a drop-off in 2010, =n apitalisation of listed mi ing companies in Indonesia continued to fall in 2012 end the fi Sener of 2013. The aggregate market capitalisarion of mining companies at 31 March 2013 was 2 position at 31 December 2011. ‘The everall market capitalisetior of the Indonesian stocs exchange the same period. Thisdeionsrates investor perceptions around the outlook for ces, as well as the attractiveness of the miring industry in Indonesia ar this tine, data Zor non-te stare revenue in 2012 indicates drop-off from 2011. Data on actual tax maining sector in 2012 are not yet available, out are expected 10 follow the same pattert ngs Domtestic Product in 20:2 ned increase in stining ndustry contribution to increase from Rp 999 trillion ir 20-1 o Rpabe 9% decrease in cuntribution w Indonesian exports from USS 34 billion ia 2011 to US: x= proportion of the couatry’s exports rema ned around 17% during 2011 and 2012 31 billior pment expendi-ures were relatively flat during 2020 and 2011, Te survey participants pending in 2012 and going forward tures (Government daa) exhibited a significant increase by 25% to US$ 4.2 billion i st spending is on existing projects, rather than exploration jons comtine to receiveepoor reports from survey respondents, ‘The most « din February 2013 placed indonesia in the warst position in terms of poli #5 other countries vent Frases Ea Net Sales Revenue 26670 nse 8 252 2a 2904 ‘cash opening Expeme tsa wet 0 sox tart, i ows i) mersation and Deprecation 1st 659 9 Profit Before interest and tay 10, 19H 10.904 107 erst fia oO ol 82 Pra Retire 1 par Ms ww 60 oon? Income ti caper 04 Te v1 C Net pron oa es tt baa 28 eer SLID Marge 9 40 companies global 5394 35 wa Not oft margin Ingenesia 26% 20% 20% 9% Tap 40 wimponies-pobil 19% 19% on Retum on capital employed Incomes 1% 26% 11% Tip $0 companies geal! 1% me 15% na Retura on shareholders’ funds Idee “8 4% 3584 126 Top $0 compares 21% 22% 21% na Debrto equity ratio Indonesia 1% am 45m a6 Top 40 companies global! 206 1% 36% na Financial performance erect ing companies offset by lower profits in mine: of the global economic crisis, mining commanies i ngthree years (2009-2011). However, return on period. ir Indonesia, as a whole, was relatively flat. While coal 1 greater magnitude than mineral compani Coal companies in Indonesia mate th al preduction by 9% comp 201 28% during 2011 (the price of bot gald aid ¢ the profitabi mineral companies fi id producers which reeordec prefit cecrea: é When looking at the mining se al companies, with higher production leve's art prices dus 2011, offset the declining profitability of mineral companies. Conilitions, however, worsened Curing 2012, Listedeoal and minetal companies both reported a significant drop-off in their financial results which is ulm Tue to the decrease ins cosil and rninier prives during 2012. Average coal and mineral prices during 2012 saw decreases in the range of MiM% -23 (except gold with an increase of 6%). The overall increase inthe production levels during 2012 was not able to recoup the unavourable impact of the decline in prices. Based on rhe finanaial performance of listed mining companies during 2012 mining companies recorded an aggregate decrease in profits by 63%. ‘This significant decrease is comprised mainly of huge decreases in profits atsome myjor listed mining companies, due partly to some lars adjustments, in addition :o the impact of price decreases, Return on average sharsholelars finds tells a diferent story. After a significant increase in 2009 dhe to the recovery of commodity prices in the aftermath o* the global economic crisis, return on average shareholders funds has consistenly decreased with a further significant drop in 2012. Ir appears that mining companies in Indonesia are having more difficulty in maincaining "heir historically good roturns to sharckolders, ‘This is dye to the increase in operational costs, which ean npt be recouped m a lower commodity price environment This ilustrates the significant challenge for fe Indoresian mining sector to improve cost eFiciency in order to ce impreve ecuins tits shareholders and attract moreinvestment i the sector Gvven the lower price environment during 2012, bot’ for coal and minerals, miniag companies are -eporting lower profits across the boar<. Keiji aim | sm Nez prof-tsed cod oom. | PaaS 20 Pr Resi eveabe vss, | Oe tense y | | oi listed ec é ---088 000 2061 290% Pee ee duiing Oe i mm Sexprote 99% | mmm Net pratt Listed minerals oH compass Resumion avenge 6 | “ER shaverolders funds 6) 476) BP shareroiders funds (0) 7 the om = pis likely = der to Fig ae MS an lie elites ta) SOO Ei Goal companies [Net Sales Revertue Fags (Cath Operating Becentes aie EBITDA a Anni and Depreciation 0 Profit Fetore interest and tax Invrest ee Profit Before tan 2004 Net presit s Tae Mineral cor panies Eat Pes Net Sales Reyenve (Cath Operating Kepenses ae 20 Tneumes expense Net prasit ‘AllGoal Compantes (listed and non listed companies) ee eee ee 269, All Mineral Companies (listed and non listed companies) sas $701 roe * re Pretty ee eee eee 49% er 50 ret eae 9.135 188 38a a6 +2 619 5938 206 788, 79, 806 2807 S46 2.230 1.195 1036 Lu 1,632 3.00 Lng. Ea Pau on ce ey 1.995, w.0%9 08 15 a 66 477 tan 194 Les 89 Pad \¢ of 2008, the price of coal and other minerals (except yold) rose steadily Litough ws st, god, as a safe haven commodity, continued its price rise throughout due to uncertainties in nomic conditions, ce trends continued in early 2012, but by Mateh all esrmodity prices had started to decline ‘on of gold, which wes able w recover itspeak February 2012 price by October 2012, all other re still priced below 2071 yearend levels, Overall coal and mineral p:lees have shown a general 2 201% (excep. wold). During thefirstquanter of 2013, Uhete ave been sigh increases in prices sstiown a different trend. Gold pres, have begun to decline. although continued economic sicularly in Europe, may see thischange before year end. x Copper — cw 5m — elu =~ — oom og goon nor tor Brae ar, Yeo, AME Mineral eenomies production levels in 2012 provide some relief from the impact of price decreases mew mr gole nes have commenced operations inthe past four years through 2012, excest for

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