ASEAN KEY DESTINATIONS
Indosmelt plans $500m IPO in 2015, plans for refinery
Local firm PT Indosmelt aims to sell its shares to the public to generate US$500 million in funds by the end of next year.
President director Natsir Mansyur said Monday that the firm was currently in negotiations with potential underwriters including Kresna Securities.
“We will use the funds gained through the initial public offering [IPO] to support our plan to build a gold refinery,” he told reporters at the Industry Ministry.
The firm would have an option to sell up to 49 percent of its total shares in the future, he added.
Apart from the planned IPO, Indosmelt is seeking other external sources to finance another project, a copper smelter worth $1 billion, which begin construction in April this year.
The firm is exploring the option of bank loans as a source of funding and has already held talks with Bank Eksim Indonesia, according
The overall investment amounting $1.5 billion planned by Indosmelt will be spent on integrated copper smelting and gold refining facilities to be established in Maros regency, South Sulawesi.
The facilities will be able to produce 120,000 tons of copper cathodes, 300,000 tons of copper slag, 200,000 tons of anode slag and 20 tons of gold annually once they kick off operations in early 2017.
Indosmelt recently signed conditional sales and purchase agreements to secure copper concentrate with US miners Freeport-McMoRan Copper & Gold and Newmont Mining Corp., which together produce 97 percent of Indonesia’s copper.
Natsir said that Indosmelt would need around 500,000 tons of copper concentrate per year and the firm aimed to source 70 percent of its total raw material from Freeport and the remainder from Newmont.
“We will agree on the volume of the copper concentrates that we will buy from them later,” he said.
He added that the purchase price would refer to the market price at the London Metal Exchange.
In a bid to make a copper smelter viable in Indonesia, benchmark copper prices must go beyond $6,000 per ton, Natsir said as quoted by Reuters earlier this month.
Last month Goldman Sachs forecast global copper prices would rebound from a four-year slump by 2016 and would trade at $7,500 per ton on average in 2017, when the firm commences operation.
Indonesia, one of the biggest global suppliers of key commodities, such as palm oil, coal, tin, nickel and bauxite, last month implemented a ban on exports of unprocessed mineral ores, which is intended to spur growth in the local processing industry and create jobs.
Apart from that, the move is aimed at boosting its exports by giving added-value to natural resources.
So far, there is only one copper smelter operating in the country, PT Smelting, which is located in Gresik, East Java and buys its concentrate supplies from both Freeport and Newmont.
Copper smelters process copper concentrates to generate blister or anode, which is then refined into cathode.
The government’s ban on unprocessed mineral exports has attracted a number of firms to build smelters and refineries locally.
The government has estimated that the ban will cut government revenue by about Rp 10 trillion ($848 million) this year due to declines in export taxes and royalties.
It will, however, redeem its losses significantly over the next two years as processed minerals start to enter the market with a higher added value.
In addition to PT Indosmelt, other firms, such as PT Nusantara Smelting and PT Global Investindo are also due to start construction of copper smelters.
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