Strengthening of dollar against rupiah does not help much mining firms

The strengthening of the U.S. dollar against the rupiah will not help much mining companies because of falling mining commodity prices in the international market, especially tin and nickel, Koran Tempo reported on Friday.

A mining analyst at BNI Securities, Norico Gaman, said the falling prices of tin and nickel in international market will surely affect tin mining companies like Tambang Timah (Timah), and nickel-producing companies like Inco.

State owned mining firm PT Aneka Tambang (Antam), that also produces nickel, however, will be spared as it also produces other minerals besides nickel, including gold, bronze, and iron sands.

Overall, listed mining companies booked a decrease in their combined profits to Rp 803.07 billion in the first semester of this year from Rp 1.05 trillion in the same period of last year, while their combined net sales rose slightly to Rp 5.68 trillion from Rp 4.59 trillion.

The weakening tin prices from between $5,200 and $5,400 per ton last year to below $3,500 per ton now surely pushed Timah's cash flow into trouble. Tin prices are forecast to fall further to $3,000 level due to the oversupply of tin in the market.

Already, the company has announced that it will postpone the second payment of year 2000 dividend totaling Rp 59.5 billion, due to the company's worsening cash flow situation.

The company's corporate secretary Prasetyo B. Saksono acknowledged that the company will call an extraordinary shareholders meeting on Oct. 31 to ask the shareholders' approval for the postponement of the dividend payment.

Timah had planned to pay a total of Rp 119.5 billion in dividends, or Rp 237.8 per share, out of its Rp 331 billion profits booked last year.

Moreover, Timah is now saddled with new obligations, that arise from the implementation of regional autonomy law. Bangka administration has issued By-law No. 21/2000 requiring Timah to contribute 20 percent of its sales to the administration's coffer.

For the first semester of this year, Timah's net profit fell almost 50 percent to Rp 126.24 billion from Rp 250.11 billion. Meanwhile, its net sales rose 19.22 percent to Rp 919.77 billion.

The company expects to collect a total net sales of Rp 1.97 trillion this year, assuming that the rupiah will stay at 9,739 per U.S. dollar.

But Norico was pessimistic about Timah's projection.

Aside from tin, nickel price is also worsening to a level of between $4,890 and $4,900 per metric tons.

Nickel company Inco already booked a drop in net profit for the first semester of this year to Rp 185.97 billion from Rp 413.1 billion.

Antam that also produces nickel, however, booked better financial performance, simply because it also produces other minerals, especially gold. Gold prices rose to about $290 per troy once now, and this contributes much to Antam.

Antam booked a net profit of Rp 263.08 billion in the first semester of this year, rising 23 percent from Rp 212.78 billion in the first semester of last year. Its net sales also rose to Rp 831.76 billion from Rp 725.26 billion. (*)