Merdeka Copper Gold seeks up to Rp 1.8t from IPO

JAKARTA. PT Merdeka Copper Gold, a mining unit of investment firm Saratoga Group, aims to pocket up to Rp 1.8 trillion from an initial public offering (IPO) next month to support a business subsidiary that focuses on production.

The miner announced Tuesday it would offer 874.36 million shares, equal to 21.7 percent of its enlarged capital, to the public between June 4 and 8.

Merdeka Copper Gold has appointed PT Indopremier Securities and PT Bahana Securities as underwriters.

Novita Lubis, PT Bahana Securities investment banking director, said the shares would be offered at Rp 1,800 to Rp 2,100 apiece.

“The funds from the IPO will go entirely to BSI [subsidiary PT Bumi Suksesindo], whose 99.9 percent shares belong to Merdeka, ” president director Adi Adriansyah Sjoekri said at a press conference in Jakarta.

BSI has allocated half of the funds to capital expenditures to build management and supporting facilities, as the company still depends on facilities provided by state-controlled diversified miner PT Aneka Tambang (Antam).

Forty percent of proceeds will be used to pay debts from Singapore private lenders Development Bank of Singapore (DBS) and UOB, will the rest will go toward BSI’s working capital to cover salary and administrative expenses.

BSI is one of two Merdeka Copper Gold subsidiaries dealing with production, while another, PT Damai Suksesindo (DSI), deals with exploration.

The two subsidiaries, each of which occupies an area of 4,998 hectares and 6,623 hectares respectively, are located at Merdeka Copper Gold’s only mining area in Sumberagung village, Banyuwangi regency, East Java.

Merdeka Copper Gold will be the first miner still in the exploration stage to be listed on the Indonesia Stock Exchange (IDX), after a regulation allowing mining firms that have yet to start production to enter the bourse was introduced in November last year.

The miner is currently owned by three prominent stakeholders, namely PT Saratoga Investama Sedaya Tbk at 25.7 percent, PT Provident Capital Indonesia at 32.8 percent and Garibaldi Thohir at 10.6 percent.

Merdeka Copper Gold director Hendri Wijaya Liong said the company planned to start production by the end of 2016 and begin earning revenue by 2017.

“We aim to produce 3 million tons gold and copper ore per year,” he said, adding that the total targeted production would reach 24.5 million tons by the third quarter of 2025.

Meanwhile, PT Indopremier Securities director Moleonoto said he was optimistic Merdeka Copper Gold’s shares would attract investors, as the company holds large reserves of gold and copper.

As of December 2014, Merdeka Copper Gold had total assets of US$126.73 million, including exploration assets worth $89 million and mining properties worth $25.1 million, according to company data.

However, Merdeka Copper Gold has yet to turn a profit since being established in 2012. The company suffered a net loss of $5 million in 2014, up from $1 million in 2013, according to data.

“The loss will keep going until we start production,” finance division head and corporate secretary Ellie Turjandi said, citing that the company was hoping to earn $19.2 million in profit in 2017. Once production starts, Ellie added, the company would prioritize domestic demand.

“But we will also be open for exporting to countries whose gold and copper demands are high, such as China and India,” she added.