The Mining Industry in Indonesia - IABCiabc.or.id/download/CONFERENCE2015/ColinJDavies.pdf · The...

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


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


1. Global Mining Business

J Resources – November 2015 # 3

Penjom Gold Mine, Malaysia


Global mining by scale


The US$2 trillion mining value chain…

# 4

Global mining in context


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


Reference = Goldsheet (Bob Johnson)

W45 / Commodity prices

# 6

2. The Gold Industry


Franked Gold Bullion Bars

Gold price history

3-Year

Range


Gold peer comparison


# 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


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


3. J Resources Profile


Picture Text, Indonesia

3D Model, Penjom, Malaysia

Bakan Gold Mine, Indonesia


Corporate structure


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


Corporate portfolio


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


• Ex Newmont asset

SERUYUNG • Opened: Jan 2014

• Reserve: 321Koz

• Resource: 422Koz


• 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


Corporate inventory


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


4. Our story so far…


Native Gold, Penjom, Malaysia


Our event timeline


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


Our milestones


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…


2015 to date…


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?


5. The challenges!



3D Model, Penjom, Malaysia Frankly, its all about balance…

Seruyung Gold Mine, Indonesia


#1 - Mining is a cyclical world…


CRASH

BOOM

Company Liquidations

Declining Exploration

DOWNTURN

Mergers

Cash Takeovers

Major IPO’s

UPTURN

Paper Takeovers

Rising Exploration

Junior IPO’s

# 20


#2 - Indonesia’s global competition


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


#3 – Indonesia’s problem areas


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!


6. In conclusion



3D Model, Penjom, Malaysia Frankly, its all about balance…


Some practical advice


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!


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

[email protected]

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