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Medco officially takes over Newmont’s arm
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The Batu Hijau mine in Batu Hijau, West Sumbawa, West Nusa Tenggara. (Tempo/Eko Siswono Toyudho)
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il and gas giant Medco Energi Internasional has officially taken over a controlling stake in the local arm of global mining giant Newmont Mining Corp. in a deal worth US$2.6 billion.
The company has acquired a 50 percent stake owned by PT Amman Mineral Investama (AMI), which controls an 82.2 percent stake of PT Newmont Nusa Tenggara (NNT).
NNT currently operates the Batu Hijau mine, the country’s secondlargest copper and gold mine in Sumbawa, which produced 240 million pounds of copper and 300,000 ounces of gold last year.
“This acquisition is immediately accretive and marks a monumental milestone for Medco Energi and our stakeholders,” Medco Energy president director Hilmi Panigoro said in a statement on Wednesday.
The Medco Energi group, owned by oil baron Arifin Panigoro, joined forces with AP Investment, led by prominent investment banker Agus Projosasmito, to acquire AMI’s shares.
The deal was backed by a consortium of three state-owned lenders Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI) in the form of loans.
Danareksa Sekuritas analyst Lucky Bayu Purnomo said Medco Energi had made the right decision by diversifying its business to copper and gold through the acquisition, considering the downward trend in global oil prices in recent years.
For the last two years, global oil prices have been in free-fall from around $110 per barrel of Brent crude in June 2014 to around $45 recently.
“Through the acquisition, the company’s net asset value will increase significantly. Moreover, it’s easier for Medco Energy to boost the performance of a settled company like Newmont instead of establishing its own subsidiary from the beginning,” Lucky said.
KGI Sekuritas Indonesia director Sam Sahiry Rumambi Supit concurred with Lucky, saying the acquisition boosted the company’s value and strength.
“In terms of cash flow, the company could also find a more efficient way to boost drilling activities at mines owned by Newmont,” he said.
Shares in Medco Energi, traded on the local bourse under the code MEDC, rose 5 percent following the announcement, closing at Rp 1,520 apiece. The stocks have surged 34.5 percent so far this year, easily outstripping the benchmark Jakarta Composite Index’s (JCI) 18 percent gain.
Meanwhile, PT Multi Daerah Bersaing, a joint venture of the politically wired Bakrie family’s Bumi Resources Minerals, the West Nusa Tenggara provincial administration and West Sumbawa and Sumbawa regencies, has also sold its 24 percent share in NNT to AMI in a deal worth $400 million.
As part of the agreement, Bumi Resources looks forward to reducing its total outstanding loan facilities. Consequently, the company’s liquidity is expected to improve further.
”The proceeds from the NNT share divestment will be used to repay most of the outstanding loan facilities. Hence, we expect the company’s consolidated debt-to-equity ratio to show significant improvement,” Bumi Resources CEO Suseno Kramadibrata said in a statement.
The company also plans to develop its other gold, copper, zinc and lead projects in subsidiaries such as Citra Palu Minerals, Gorontalo Minerals and Dairi Prima Mineral.
