Interview: Ancora’s new gold mine venture

By Tri Subkhi R

IDX-listed PT Ancora Indonesia Resources Tbk is developing new venture in gold mining in West Nusa Tenggara Province as part of business diversification strategy.

Founded in 2003, the company (formerly known as PT TD Resources) also provides drilling and work-over services for oil well operations, blasting services, mining services and shipping services.

In November of 2017, Ancora acquired Indotan Lombok Pte Ltd, which owns 90 percent of PT Indotan Lombok Barat Bangkit (ILBB), an IUP mining business license holder of a gold mine in Lombok Barat, West Nusa Tenggara Province.

Currently, Ancora is in the process of completing the required permits before starting commercial production of the gold mine which is expected to be in 2020.

Petromindo.com’s Tri Subkhi R. recently talked with Rolaw P. Samosir, President Director of PT Ancora Indonesia Resources Tbk, and discussed about Ancora’s plans in developing ILBB. The excerpts are as follow:

Petromindo: Please elaborate about current development of Ancora’s gold mine project in West Nusa Tenggara?

Rolaw: We acquired 100 percent shares of Indotan Lombok Pte Ltd in November 2017. Indotan Lombok Pte Ltd owns 90 percent of ILBB while the remaining 10 percent belongs to Regional Government of Lombok Barat. We obtained IUP Operation Production permit in January 2019 and currently we are in the process to obtain the Borrow and Use of Forest Permit (or IPPKH), which is expected to complete in September 2019.

After IPPKH, we plan to conduct exploration drilling activities to have JORC Report by December 2019. During these processes, we are developing supporting infrastructure facilities and (gold) processing facility. We expect ILBB will start commercial production in the fourth quarter of 2020 or first quarter of 2021.

We are also looking for financing for capital expenditure. We have two capital expenditure stages, namely for exploration activities in 2019 and construction stage in 2020. We consider any options of financing, including bank lending, private equity or other options.

P: Can you explain about the outlook of gold mining industry?

R: I think gold mining industry is quite prospective because I see less (price) fluctuation compared with other commodities. Moreover, the gold price currently shows stable trend between US$1,280 to US$1,300 per oz.

We are confident that gold mine project will improve Ancora’s (financial) performances, which (production) is expected to be realized in 2021 although the production level will not yet be at full capacity. In 2022, it (production volume) is expected to be more stable.

Let me explain about our gold mine. We have three prospects namely Pelangan, Mencangah and Selodong. We are currently focusing on Pelangan. We are (in the process of) obtaining IPPKH for 300 hectare of Pelangan site out of 10,000 hectare of our total concession.

We have conducted about 200 exploration drillings in those three prospects, and planned drilling in October will be focused in Pelangan. In fact, the most prospective site is Selodong because it has porphyry.

We actually have a fourth prospect near Pelangan site where exploration drilling had been conducted by the previous owner.

P: It means that Ancora has long term business plan for ILBB?

R: We estimate Pelangan will have approximately 6 to 8 years of production operation. In total, we may have 15 to 20 years of production operation, but it will depend on how much the production volume is and how much actually the gold resources are.

P: How much is the estimated gold resources?

R: We cannot disclose it now because we have to wait for the JORC Report. We expect the report to be completed in December 2019, but maybe the actual reserve and resources will be disclosed in December 2019 or early of 2020.

P: How Ancora will integrate all business units in developing the gold mine project?

R: For gold mine project, we will have support from our other two business units namely PT Bormindo Nusantara (drilling services company) and PT Multi Nitrotama Kimia (MNK, producer ammonium nitrate and nitric acid). We will need ammonium nitrate (AN) and explosives (for mining operations) that will be acquired from our AN plant in Cikampek, West Java and accessories plant in Handil, East Kalimantan. The drilling equipment will utilize Bormindo’s drills, which can be applied for mining exploration.

If we talk about explosives, it is used for mining industries, such as coal, mineral and quarry mines. As we know that the fluctuation in coal industry is very strong. Any negative movements from two important global coal markets, particularly China and India, the coal prices will be depressed.

However, we hope the condition may not affect our performances since explosives services are being used by high-calorific value coal mines, which shows more stable price rather than low rank coal prices.

In fact, MNK recorded very impressive financial performances in 2018. We suffered in 2017 with EBITDA of only US$500,000 to US$600,000 but we could achieve US$13.9 million of EBITDA in 2018. Ammonium Nitrate (AN) sales volume also increased from 76,000 metric tons in 2017 to 110,000 metric tons in 2018.

P: So, it means that Ancora through MNK has been diversifying its explosives business. It is not only focusing on coal but also mineral. Is it right?

R: First, we are diversifying the markets. Secondly, we also diversify the explosive products and services. MNK produces AN and explosive accessories, such as detonator, and we plan to build booster plant in our facility at Handil.

We are an integrated explosives service provider. We used to be a producer of explosives products, but now we provide A-to-Z explosive services.

Editing by Reiner Simanjuntak