Bakrie strikes back! That's my first impression when I read the news that
Bakrie Group, through two of its holdings ie Bakrie & Brothers (BNBR) and
Long Haul Holdings Ltd, submitted a proposal to the management of Bumi Plc to
buy back shares in Bumi Resources (BUMI) which held by Bumi Plc, at
a value of US$ 278 million. However, BNBR and Long Haul won’tt buy all of the
shares, but only 18.9%, so that Bumi Plc would still holds 10.3% stake in BUMI
(because Bumi Plc is currently holds 29.2% stake BUMI). On the other hand,
Bakrie will also divest its 23.8% stake of Bumi Plc, in exchange for the
remaining 10.3% shares of BUMI which mentioned earlier. So, if the process goes
well, then before Christmas this year, Bakrie will no longer have interests in
Bumi Plc, and Bumi Plc will also no longer a shareholder in BUMI.
And how about Berau Coal Energy (BRAU)? Bakrie was also offered
to buy back 85% stake of BRAU which held by Bumi Plc, at a value of US$ 947
million. So if the proposal is approved, Bakrie would spend more than US$ 1.2
billion to get out of the ‘takeover trap’ of Bumi Plc, or in this case,
Nathaniel Rothschild .
The question, would the process be that easy? Of course not. In a
disclosure released by Bumi Plc in London on October 11 yesterday,
the management of Bumi Plc said they would consider the offer, but did not said
that they will accept it. Well, you could say that from now on, everything can
happen. But if Bakrie could make it, to end their partnership with Nathaniel,
they would still lose because they had to pay US$ 1.2 billion or around Rp11
trillion to Nathaniel. This is amazing, considering that all this time, Bakrie
was almost could take everything from everybody without spending some money or
capital, but it did not apply to a man like Nathaniel.
Well, when we come to the possibilities of what could happen in the near
future after this Bakrie’s counter, then as it already mentioned above,
everything is possible. Therefore, it might be more interesting to consider,
what is inside the BUMI (and also BRAU), so the Bakrie Group is desperately
defend it? In fact, BUMI is a parent of many great assets, coz’ Bakrie places
their acquired mineral resources assets, like coal or other, under BUMI. Okay,
here are the details.
1. PT Arutmin Indonesia (Arutmin)
Arutmin is the first asset of BUMI that was acquired in 2001 (detailed
story, read Heart
is Only for Lovers, Bro!). Arutmin has six coal mines in East
Kalimantan with a total concession area of 70 thousand hectares, with
total assets of US$ 1.4 billion as at June 30, 2012. In 2011, Arutmin produced
24.7 million tons of coal, grew 18.5% compared to the year 2010. Meanwhile, as
of June 30, 2012, proven coal reserves of the Company were 348.5 million tons,
or sufficient for the next 15 - 20 years, and that does not include the coal
resources (which the status could potentially increase to be reserves) as much
as 2.3 billion tons. Wow!
2. PT Kaltim Prima Coal (KPC)
KPC is definitely the greatest asset of BUMI, with assets of US$ 2.4
billion as of June 30, 2012. Located in East Kalimantan (Borneo), in 2011, KPC
produced 40.5 million tons of coal, making it the largest coal producers in Indonesia behind
Adaro Energy (ADRO). The proven coal reserves of KPC were 1.1 billion tonnes as
of June 30, 2012, while its coal resources were 3.5 billion tonnes.
By the way, I have a friend who had a coal mining business in East
Kalimantan. And he said that, KPC owns 90 thousand hectares of coal mining
concession which is located right in the middle of the largest 'coal ocean' in
the island of Borneo. While the other coal companies who are
operating in a nearby locations such Harum Energy (HRUM), Indo Tambangraya
(ITMG), Bayan Resources (BYAN), etc., they’re just get the ‘coasts’ only. So it
wasn’t a surprise when KPC was divested by Beyond Petroleum and Rio Tinto in
2003, many local conglomerates were fighting to acquire it. And indeed, the
Bakrie’s victory of the acquisition battle has caused Bakrie to be a great
conglomerate, until today.
3. PT Fajar Bumi Sakti (FBS)
FBS is BUMI’s another coal mining company in East Kalimantan. But if
compared with KPC, FBS is relatively small with coal resources of 'only' 335
million tons by the end of 2011. Maybe that's why, when Bakrie is reportedly
getting hit by financial difficulties, one of the recurring rumor is that they
will sell this FBS, to gain some cash. Including when on October 9, in news
portal BeritaSatu.com, there were news that mentioned that BUMI would sell FBS
to Sampoerna Group, at a price of Rp2 trillion, which was then denied by BUMI’s
management.
Although FBS is small and seem insignificant, FBS is actually has a
potential to be great in the future, although not as big as KPC. In 2012, the
company is estimated to produce up to 1 million tons of coal. But in the coming
2017, the company is projected to be able to produce 10 million tons of coal
per year, along with the development of mining infrastructure that has started.
4. PT Pendopo Energy Coal (PEB)
PEB is the most recent coal assets acquired by BUMI, which was acquired in
2009. Conveniently located in Muara Enim, South Sumatra, PEB has coal
resources of almost 2 billion tonnes. However, since PEB is not in production
because it is still in the exploratory stage, then there is no exact data about
the number of proven coal reserves of the company. But if it is true that coal
resources owned by PEB reached 2 billion tonnes, then PEB has the potential to
be The Next KPC. The District of Enim Muara itself has always been known as the
largest ‘coal storehouse’ in Sumatra Island, where one of the largest
coal company in Indonesia, PT Bukit Asam (PTBA), also operate there.
5. PT Gorontalo Minerals (Gomin)
Indonesia is not only rich in coal, but also rich in gold and its
follower minerals such as copper, silver, and molybdenum. For this reason,
Bakrie is also did not want to miss the opportunities in this sector. In
December 2010, Bakrie Group through Bumi Resources Minerals (BRMS),
which is a subsidiary of the BUMI, obtained an exploration license for gold
mining concessions covering an area of 36 thousand hectares in Balongo Bone
District, Gorontalo Province. As of June 30, 2012, the mine was fully
explored, and now has entered the study of feasibility, before then entering
the production. In a report released by BRMS on 12 September 2012, Gomin has an
estimated 137.2 tonnes of gold proven reserves. This is gold,
you know, not coal.
6. PT Citra Palu Minerals (Cipam)
Cipam is another gold mining company owned by BUMI through BRMS, which has
five mining concessions covering a total area of 139 thousand hectares in
Central and South Sulawesi, or nearly four times larger than the mining
concessions ofy Gomin. As well as Gomin, Cipam is currently in the feasibility
study process. But so far there are no reports about how much the gold reserves
the company has.
7. PT Dairi Prima Mineral (Daprim)
Daprim is mining company of lead, zinc, and iron ore, which is located in North
Sumatra. For this company, the activities are still in the exploratory stage.
However, based on preliminary estimates which released in February 2011, Daprim
had iron ore reserves of 25 million tons, which are sufficient for the next 30
years.
8. PT Newmont Nusa Tenggara (NNT)
NNT is probably the second biggest asset of BUMI, after KPC. In 2010, BUMI
successfully acquired 24% stake in NNT, a large-scale gold mining company
located in Sumbawa, West Nusa Tenggara. Currently NNT has three mines, ie
Batu Hijau, Elang, and Rinti, all of which are located in Sumbawa. At the
end of 2011, Batu Hijau mine alone is estimated to have 790 tons of gold
reserves! So, it might be argued that NNT is the second largest gold mining
company in Indonesia, after the Freeport in Papua. And unlike
Gomin, Cipam, and Daprim, which are all still not in production yet, NNT is
already in production and generating revenue.
However, Bakrie only holds 24% stake in NNT, so they can not be regarded as
the owner of the company. That's why to this day, Bakrie through BUMI is still
trying to acquire 7% stake in NNT, which will be divested by its owner, Newmont
Corp. So, BUMI will hold a total 31% stake in NNT. Well, if the process is
going as planned, the next efforts to acquire the whole company will be easier.
Bakrie could just put one person to occupy the position of HR director, for
example, and tell him to encourage workers to strike, or any other 'disorders'.
Obviously, the Newmont Corp. would uncomfortable, and in the end would chose to
exit completely from the NNT, aka sell the remaining shares of the company to
Bakrie. It was the same way when Bakrie kicked out BHP Billiton from Arutmin
But until now, Bakrie’s attempt to acquire 7% shares of NNT is hit a steep
road. Even for this moment, they can not focus on that, considering that there
are some man who are more powerful than they self, namely Nathaniel Rothschild,
who is trying to take over BUMI as a whole, including NNT.
Others
Well, for many conglomerates, BUMI is actually very sexy and ‘solid
containing’, considering that BUMI contains at least eight valuable assets that
have been discussed above. Beyond that, BUMI has also some assets located in
overseas, such as Bumi Mauritania SA (Mauritania, West Africa), Konblo Bumi
Inc. (Liberia), and Gallo Oil (Republic of Yemen). The three
companies are each engaged in the mining of iron ore, gold, and oil and gas.
However, all of three are still in the exploratory stage, and there is no
clarity about how much the reserve of the resources, and when exactly they will
produce. So I assume that the three companies above are not even exists.
Beyond its overseas assets, of the eight companies that have been discussed
above, it was only KPC and Arutmin who have contributed significantly to the
company's earnings (And also NNT. But because BUMI only holds 24% of its stake,
the revenue from NNT is not consolidated, but is considered as income from
associates). But still, the presence of KPC and Arutmin are still making BUMI
become a valuable company, considering that the coal reserves of the two
subsidiaries is quite sufficient for the next 30 years. And that's why Bakrie
is desperately defends BUMI from anyone who tries to take it, including
Nathaniel. Perhaps the chairman of Bakrie Group, Mr. Nirwan, said this to
Nathaniel: ‘I’ve been worked hard to acquiring the assets from here and there.
And now you, a rich kid, is just come to take it all??? Sorry kid, not that
easy!'
Unfortunately, BUMI is only attractive to large investors. For the retail
investors in the market, you can not be the owner of the company by buying the
shares in the market, because of your lower position than the ‘bookies’ (except
maybe, if you buy BUMI at Rp1 trillion or more). In fact, Bakrie has always
making retail investors as a 'commodity' and the source of funds, by fiddling
with the stocks. Including, the phrase of ‘saham sejuta umat’, or ‘stocks of a
million of people' for BUMI was also created by their own (through the BEI),
because they’d know very well that most of the retail investors in Indonesia
were like to speculate on ‘roller coaster stocks’.
Okay, then how about BRAU? BRAU has only one asset, namely PT Berau Coal,
which owns three coal mines located in Berau, East Kalimantan. As at June
30, 2012, BRAU has total coal reserves of 316.6 million tons, or approximately
equivalent to Arutmin. So, BRAU is relatively small when compared to the BUMI,
which contains Arutmin, and others. But Bakrie didn’t put BRAU as a BUMI’
subsidiaries, because it wasn’t them who had working hard to take over this
company from the previous owner (entrepreneur Ibrahim Risjad), butRecapital
Group, while Bakrie was simply provide the funds. One of Recapital’ official,
Mr. Rosan Roeslani, is a direct protege of Nirwan Bakrie.
Related to the Bakrie vs Rothschild saga, maybe the Recapital’ boys were only could sit and watch without doing nothing. But what's interesting to note is the position of the Samin Tan, the owner of Borneo Lumbung Energi & Metal (BORN), where the question is, where would his position be, in case if Bakrie had getting out from Bumi Plc? Because Mr. Tan's is also holds 23.8% shares in Bumi Plc. Would Bakrie Group just left him alone? In an announcement released by on last October 11, the management stated that they are being discussed with the Bakrie party, relating to dissolution or termination of their partnership with Nathaniel. But so far, there hasn’t been any decision. Let see the next episode.
Original article was written at October 15, 2012
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