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tate-run miner PT Aneka Tambang (Antam) plans to allocate up to US$860 million for capital expenditure in 2012 and 2013, primarily for expansion in the processing business following a law that mandated mining companies to process their raw products prior to export.

“We’re planning to allocate $580 million in 2012 and $280 million in 2013,” Antam finance director Jaya Tambunan said on Thursday.

The company will use the capital to improve its plants, finance land acquisition and develop its nickel and ferronickel mining sites in Pomalaa, Southeast Sulawesi and in East Halmahera, North Maluku.

“We need to spend more to purchase heavy equipment in anticipation of the mining law that requires Antam to operate its own processing plants,” Jaya said.

Under the 2009 law, the government will ban raw material exports from 2014. The law requires all mining companies to process raw materials in the country to encourage downstream industry.

Antam will use the funds raised from its upcoming bonds issue to support the capital expenditure. It would issue bonds worth in total Rp 4 trillion ($444 million).

In the first tranche, the company will issue two series of bonds worth up to Rp 1.5 trillion with coupon rates for the A series at 8.375 to 9.125 percent with a seven year tenure, and the B series at 9 to 9.75 percent with 10 years tenure.

The second tranche is expected to be issued after the first quarter next year, depending on the investors’ interest in the first bond tranche, according to Jaya.

Credit rating agency PT Pemeringkat Efek Indonesia (Pefindo) ranked Antam’s bond ratings at AA.

The bond is scheduled to be listed on the Indonesia Stock Exchange (IDX) on Dec. 15.

“Besides the bonds, we will also look for other potential financing, including from banks, both for bilateral and syndicated loans,” Jaya said.

Antam reported a 64 percent increase in net profits to Rp 1.56 trillion during the first nine months of the year as against Rp 943.2 billion in the same period last year.

Increasing sales volume and prices of ferronickel and gold contributed to the jump in net profits.

Antam president director Alwinsyah Lubis said his company would exceed its target for gold production this year. “Our target this year is 5.3 tons. We’ve already produced 5.8 tons up to the third quarter of the year. We hope to reach about 6 tons by the end of the year.”

He said the company recently located a gold mining site in Papua and had already obtained permission to start activities there. (rcf)