Indosmelt plans IPO next year

Smelting company PT Indosmelt plans to sell about 49 percent shares via initial public offering (IPO) next year in a bid to raise funds to help finance the development of a copper smelter and gold refinery in the country, Investor Daily and The Jakarta Post reported on Tuesday.

The reports said that the company aims to raise between US$450-500 million in proceeds.

President director Natsir Mansyur said Monday that the firm was currently in negotiations with potential underwriters including Kresna Securities.

Apart from the planned IPO, Indosmelt is seeking other external sources including bonds and bank loans, he added.

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.

In a bid to make a copper smelter viable in Indonesia, benchmark copper prices must go beyond $6,000 per ton, Natsir said.

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 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.

The government?s ban on unprocessed mineral exports has attracted a number of firms to build smelters and refineries locally. 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. (*)