Indonesia's Borneo Lumbung to buy Bumi stake for $1 bln

Tue Nov 1, 2011

* Deal to help Bakrie pay bulk of $1.35 bln debt, avoid default
* Deal values Bumi Plc at 10.91 pound each
* Talks with Glencore fail because lenders uncomfortable
* UBS says deal is net positive for Bumi

By Saeed Azhar and Fathiya Dahrul

SINGAPORE/JAKARTA, Nov 1 (Reuters) - Indonesia's Bakrie Group is selling a 23.8 percent stake in London-listed Bumi Plc , its joint venture with financier Nathaniel Rothschild, to coal miner PT Borneo Lumbung Energi in a $1 billion deal to avoid a loan default.

The deal with Borneo, which is backed by Indonesian billionaire businessman Samin Tan, would help Bakrie pay off the bulk of an $1.35 billion loan and extricate itself from a debt crunch that has weighed on the share price of the world's largest thermal coal exporter Bumi Resources .

The agreement between the Bakrie Group, run by one of Indonesia's most powerful families, and Tan marks the second time in three years that the Bakrie family has had to scramble together a transaction to ease its debt load.

The deal was sealed after Glencore , the world's largest diversified commodity trader, dropped out of talks on refinancing the Bakrie loan.

It also marks the second time Tan, a former partner at accounting firm Deloitte, has negotiated to buy a stake in Bumi, having failed to strike a bold deal in 2006.

Tan succeeded this time, with PT Borneo confirming the agreement in a statement, adding that the total consideration of $1 billion valued Bumi plc's shares at approximately 10.91 pounds each at the date of the announcement. That translates to a 6 percent premium to the last 6-month volume-weighted average price, and would be payable in cash.

"The biggest haircut in this deal has been taken by the Bakries," said a source with direct knowledge of the deal. "They have lost half their stake in Bumi Plc."

GLENCORE DEAL FELL THROUGH

Sources close to the deal told Reuters earlier that talks between the Bakrie Group and Swiss-based Glencore, the previous frontrunner, fell through because lenders were not comfortable with the structure of the proposal.

Glencore had been looking for additional marketing rights over Bumi's coal in return for lending Bakrie $800-$900 million.

"We think it is net positive for Bumi not having to incur higher marketing costs from allocating greater volumes to the trader," said Singapore-based UBS analyst Andreas Bokkenheuser in a note to clients.

However stock investors remained apprehensive as shares of PT Bumi Resources , Asia's biggest thermal coal exporter, and coking coal producer PT Borneo Lumbung Energi & Metal both fell.

PT Borneo dropped 11.7 percent and Bumi fell 4.3 percent, compared with a fall of 1.3 percent for Jakarta's benchmark index .

Tan indirectly controls 73 percent of PT Borneo and also owns Indonesian investment bank Renaissance Capital.

The Bakrie Group, a sprawling conglomerate with interests in property, energy, plantations, coal and telecoms, also fended off debt crises in 1998 and 2008.

Its controlling family is headed by Aburizal Bakrie, chairman of Indonesia's Golkar Party, who many analysts believe will run for the presidency of Southeast Asia's largest economy in 2014.

CONTROL OF MINES

Tan, an ethnic Chinese Indonesian from the small city of Bengkalis in central Sumatra, has previously played down any direct connection with the powerful Bakrie family.

In a 2006 interview with Reuters, he said he was a "simple, homegrown financial professional" and added that Renaissance was independent of Bakrie.

The deal, which would keep control of the Bakrie Group's world-class mines in Indonesian hands, is part of the family's attempts to refinance the loan obtained in March this year to consolidate debts.

Credit Suisse arranged the loan, secured against the Bakrie Group's roughly 47 percent stake in Bumi Plc, and lenders included the Swiss bank and a group of hedge funds.

Glencore, which already markets Bumi coal, has frequently used its deep pockets to help out troubled counterparties, cementing the relationships it sees as key to its business.

The world's largest diversified commodity trader had been ahead of rival Vitol and others in negotiating a deal.

Standard Chartered is advising Borneo and is also arranging the financing, while Credit Suisse is advising the Bakrie family and its various entities, the sources said.

"This transaction creates a partnership between two leading mining groups in Indonesia," said Tan, who is also president director of PT Borneo, in a statement.

"The transaction also provides BORN (Borneo) with exposure to a high quality metals portfolio, thus transforming BORN from a pure coking coal producer into a world class diversified natural resources producer."

After the transaction, Borneo together with PT Bakrie & Brothers Tbk and Long Haul Holdings -- companies controlled by the Bakrie Group -- would own an approximate 47.6 percent stake and an approximate 29.99 percent voting interest in Bumi Plc, according to the document seen by Reuters.

The deal is subject to approval of Borneo shareholders in a meeting on Dec. 15 -- a formality since the deal document states Tan's vehicle, PT Republik Energi & Metal, will put its 73 percent holding behind the agreement -- and certain other conditions, including regulatory approvals.

Bumi Resources' share price has been weighed down by investor concerns over high debt levels and transparency. Indonesia's stock exchange said last year it would fine three Bakrie firms, including the family's holding firm Bakrie & Bros, for failing to explain discrepancies in their financial reports.

The London-listing, a joint venture engineered by Rothschild, the billionaire scion of the European banking dynasty, through a complex reverse takeover, was meant to bring greater corporate governance and better access to capital.

But a sharp decline since June in the share price of Bumi Plc amid falling equity and commodity markets triggered a mandatory repayment clause on the one-year $1.35 billion loan that had been due to mature in March 2012.

(sourced Reuters)

Nigeria to open investment promotion units in Mines Ministry

Monday, 22 Aug 2011

In a bid to attract local and foreign direct investment for the development of the nation' mining industry, Nigerian government said that it will open investment promotion units in the Ministry of Mines and Steel Development and its agencies.

Mr Musa Mohammed Sada minister of mines and steel development made this known when he received a delegation of investors from Dubai, United Arab Emirates. He said the process of establishing the investment promotion units is in progress.

He explained that when the program is completed, both local and foreign investors will easily access on line any investment information they seek for in the minerals and metal sector. He said that the Federal Government was ready to assist and collaborate with foreign investors towards the development of Nigeria’s mining industry.

Mr Sada said that one major challenge militating against the development of the nation’s mining industry was funding. He added that the present administration was trying to address that challenge through the establishment of a Solid Minerals Development Fund, whose Board of Directors will be inaugurated soon.

According to him, banks and other financial institutions in the country are beginning to show interest of investing in the nation’s mining industry as a result of reforms in the sub sector. He added that the sector is driven by the private sector while government administers and regulates.

Mr Sada stated that the Federal Government was focused on the development of seven strategic minerals such as coal, bitumen, iron ore, lead zinc, barytes, gold and limestone.

Mr Mujtaba Sarfaraz SVP of Mas Clearsight Limited said that the essence of their visit was to explore the possibility of investing in Nigeria's mining industry.

He disclosed that his company is into mine development and feasibility studies among other areas. Some of the minerals they intend to explore and exploit in Nigeria include coal, iron ore, manganese and copper among others.

(sourced Thisdaylive)

Mongolia seeks balanced growth to avoid Dutch disease from mining boom

Monday, 14 Mar 2011

Mongolia needs to look beyond the coal and copper mines that are driving its economic boom to find a more balanced model of growth.

Mr Sukhbaatar Batbold PM of Mongolia said that investment in mining projects and speculation on the wealth they will create in the world’s most sparsely populated nation have made Mongolia’s tugrik the best-performing currency since the beginning of last year. That’s putting exports such as cashmere at a disadvantage and adding costs to newer industries such as tourism, food production and metal processing.

Mr Batbold said that it is important to have a good mining industry. But it is a tool of moving many other things forward. What we want to focus on is creating jobs in many other industries.

Mongolia needs to avoid developing Dutch disease where the financial benefits of a resource boom lead to a hollowing out of other sectors, according to the World Bank. Sandwiched by Russia’s far East to the north and 1.3 billion strong, resource hungry China to the south, the government is looking for ways to lessen its vulnerability to competition from its giant neighbor and reduce its reliance as a customer.

Mr Rogier van den Brink lead economist for Mongolia at the World Bank said that “Mongolia can’t compete with China on wages but it can certainly find areas in the Chinese economy where it could have an edge such as in cashmere meat and services. Diversifying from resources would be a solution similar to what the Dutch found to combat the resource disease.”

The discovery of gas in the Netherlands drove up inflation and damaged manufacturing. In Mongolia, Vale SA and Xstrata Plc are leading six groups bidding for 1 billion tonne concession at the Tavan Tolgoi coal project. Rio Tinto is developing the Oyu Tolgoi copper and gold deposit which it expects will account for 30 percent of Mongolia’s gross domestic product when completed.

The country also holds oil, potash, iron ore, uranium and the rare earth minerals used in Toyota Motor Corporation hybrid cars and Raytheon Company’s Tomahawk cruise missiles. Plans this year to begin mining part of Tavan Tolgoi and preparatory work for the 2012 start up of Oyu Tolgoi may cause the economy to expand 33 percent in dollar terms. That compares with a 10 percent growth in local currency terms. (sourced:bloomberg)

Mining nationalisation "road to ruin" for S.Africa: Anglo boss

Tue Feb 8, 2011 8:24am GMT
CAPE TOWN (Reuters) - South Africa should not heed "false prophets" calling for mining nationalisation because of the damage such a move would do to its economy, the head of global mining giant Anglo American said on Tuesday.
"Mining companies simply will not invest if they cannot be assured that the assets they create will be secure," chief executive Cynthia Carroll said in a speech at a major African mining conference in Cape Town.
"In ignoring this truth, the false prophets who argue for nationalisation are advocating the road to ruin -- a path we must not follow," she said.
In the last year, radical elements within South Africa's ruling African National Congress (ANC) -- most notably its Youth League -- have been calling for nationalisation of the mining industry, sparking concern among domestic and foreign investors.
Senior ANC figures including President Jacob Zuma and mines minister Susan Shabangu have said nationalisation is "not policy", but have stopped short of quashing the idea, suggesting it may have some traction in the corridors of power.
The notion, which was tabled at a major ANC policy meeting last year, is seen as one of the primary reasons for the decline over the last 10 years in the mining sector in South Africa, the world's biggest platinum and number three gold producer.
The industry has also been plagued by a series of controversies in the administering of mining and prospecting licences, although the government says it is overhauling the system to eliminate the possibility of corruption and blunders.
Mining accounts for 8 percent of GDP in Africa's biggest economy, and directly employs more than 500,000 people.
The government has placed it at the heart of plans to tackle 25 percent unemployment over the next five years, although many anlaysts are sceptical about turning the industry round.

China sells thermal coal cargo into S Korea at $142/T FOB

China's top coal producer China Shenhua Energy Co Ltd has sold a February-loading thermal coal shipment to a South Korean buyer at $142 per tonne on a free-on-board (FOB) basis, two sources with knowledge of the deal said on Jan 10.

The deal, sealed mid-last week, was for coal with a heating value of 5,800 kcal/kg, said the sources, who asked not to be identified because it was a commercially sensitive issue.
The sale comes as a devastating flood hit Australia's eastern Queensland state, knocking out an estimated 3-4.5 million tonnes of global thermal coal exports and prompting many South Korean and Japanese utilities to scour the market for alternative supplies.

News via Reuters, Jan10 ,2011

India eyes South Africa’s coal, gold resources

JOHANNESBURG (miningweekly.com) – India has set its sights on South Africa’s mineral resources and is keen to form partnerships with local companies, executives from trading house MMTC said on Friday.
The State-owned MMTC, which is opening an office in Johannesburg to increase its exposure to the mineral-rich African markets, is particularly interested in South Africa’s coal and gold, MD Hardip Mann said in Johannesburg.
India is battling with an everiincreasing demand for power, and may face a coal shortfall of 189-million tons a year by 2015, which would lead to a twofold increase in imports.
Traditionally, the country had been leaning on Indonesia for coal, but Mann pointed out that increasing demand for coal from other countries, such as China, was putting pressure on the island country.
“That means our next destination will be countries such as South Africa, that has the right quality coal to blend with our coal.”
Chairperson Ved Prakash said that MMTC would be looking to take its coal business a step further than just trading.
“We are interested in forming partnerships and joint ventures on certain projects and investing in certain coal mines.”
Mann also said that India had an insatiable appetite for gold.
Last year, the country imported about 700 t of gold. Of this, MMTC was responsible for trading 186 t of gold, or about 25%.
“We are already in talks with the South African companies such as Rand Refinery, AngloGold Ashanti and Gold Fields to establish partnerships, that would cut out the banks and focus on direct imports.”
Other commodities that sparked MMTC’s interest include diamonds, non-ferrous metals, agro products and fertilisers.
Indian High Commissioner to South Africa Virendra Gupta emphasised that MMTC and other Indian companies fully supported South Africa’s drive to increase the beneficiation of commodities, as stated in Economic Development Minister Ebrahim Patel’s New Growth Path, and that they would take advantage of such possibilities.
Gupta also said that MTTC’s office in Johannesburg would stimulate bilateral trade between India and South Africa.
The two countries have set a $10-billion trade target during President Jacob Zuma’s visit to India, which it hoped to reach within the next year.
Mann said that opening an office in Johannesburg would provide the company with a base to significantly increase its exposure to the markets. “We want to cut out the middle man, therefore saving costs and upping profitability for both countries.
“In fact, I will admit that we are late. We should have opened offices in South Africa five years ago already.”
MMTC is India’s largest exporter of minerals, the single largest importer and supplier of gold in the country, the leading exporter and importer of agro commodities and a major player in coal and hydrocarbons.

Source: Miningweekly.com, By: Loni Prinsloo,7th January 2011, Edited by: Mariaan Webb

Government remain cautious over foreign investment in mining in Indonesia

Courtsey news via Saturday, 08 January2011
The Jakarta Globe reported that, The government expects $3.2 billion of investment to flow into the mining sector this year as foreign investors turn to Indonesia to capitalize on possible increases in global commodities, an Energy Ministry official said.
A looming increase in global demand for commodities will lure investors, said Bambang Setiawan, director general of mineral, coal and geothermal at the Energy Ministry.
“We are targeting moderate investment in the mining sector this year, at $3.2 billion, slightly higher than last year’s $3.18 billion,” Bambang said on Friday.
Priyo Pribadi, the head of the Indonesian Mining Association, forecast an even more bullish future for the sector, projecting as much as $8 billion in investment. “I have documented thousands of investments this year,” he said. Bambang said almost all production of commodities is expected to increase this year. Tin production is forecast to increase sharply to 95,000 tons this year from 54,646 tons last year, he said.
Coal production is forecast to surge 27 percent to 375 million tons this year from 275 million tons last year. Bambang also said coal prices would remain high. Recent floods that struck Australia are expected to boost coal prices. Harvests of several commodities in Indonesia, especially palm oil and rubber, were damaged by the La Nina weather phenomenon, which caused heavy downpours throughout the dry season and reduced supplies, contributing to higher prices.
Data from the Energy Ministry showed the coal price in 6,322 cal/kg is $112.4 per ton, higher than than December’s price of $103.4 per ton.
Analysts claim that uncertainty over regulations will hamper mining investment, and Bambang admitted that land acquisition and environmental rules remain a problem.
The Jakarta Globe reported last month that total investment in the oil and gas industry was estimated to increase 58 percent to $18.9 billion this year from $11.95 billion last year.
Oil production is forecast to reach 955,000 barrels per day this year, lower than the government’s target of 965,000 bpd in 2010
Source: The Jakarta Globe