INCO nominates Tony Wenas as new CEO

PT International Nickel Indonesia (INCO) Tbk nominates Tony Wenas as the new CEO to replace Arif Siregar who has tendered his resignation.
Tony Wenas most recently held the position of director and executive vice president/general counsel with PT Freeport Indonesia. Tony graduated from University of Indonesia's law school.

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Arif Siregar resigs from INCO

Arif Soeleman Siregar has tendered his resignation letter as CEO of PT INCO, but pending shareholders meeting scheduled in March 2010. INCO reportedly offered him non-executive position (commissioner).
Arif was appointed CEO of INCO in July 2006. He was president director of PT Kelian Equatorial Mining prior to the INCO job. He has also served as Vice President of PT Rio Tinto Indonesia. Prior to that, he was employed by Palabora Mining Company (PMC) South Africa, as General Manager Industrial Minerals. He has held the position of General Manager Coal Chain of PT Kaltim Prima Coal (KPC) East Kalimantan.
Mr. Siregar is Chairman of the Indonesian Mining Association (IMA), Vice Chairman of the Energy Committee of the Indonesian Chamber of Commerce and Industry (KADIN), and a member of the Board of Advisors Organization of the Indonesian Mining Experts(PERHAPI).
Mr. Siregar is a graduate of Bandung Insitute of Technology,where he obtained his Bachelor of Science degree (Mining and Metallurgy) in 1980. He completed his Ph.D (Metallurgy) at the University of Queensland in Brisbane, Australia in 1992.

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INCO secures US$300M for Karebbe hydropower

Nickel producer PT Inco Tbk has executed a senior export facility agreement for a loan facility in the amount of up to US$300 million with the Bank of Tokyo-Mitsubishi UFJ Ltd and Mizuho Corporate Bank to finance the hydro power project at the Larona River in the Karebbe area of South Sulawesi.

The export facility is supported by Nippon Export and Investment Insurance (NEXI). "In light of its improved financial performance and improved financial market conditions, the company decided not to execute the short-term revolving credit facility agreement with Vale International which was approved by shareholders in April 2009," Inco said in a statement Monday.

The Karebbe project will increase Indo's hydro power generation by 33%, adding 90 MW to the current capacity, and is expected to be completed in 2011. The project is part of the Inco's efforts to produce permanent downward shifts in cost structure, as it will replace high-cost thermal power generation in an energy intensive operation.

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Locals want 50% of INCO's nickel concession

South Sulawesi governor Syahrul Yasin Limpo said PT International Nickel Indonesia (Inco) Tbk has to cut its concession area by 50%. 

"We have started to talk with INCO to rationalize 50% of its 118,000 hectares concession," Syahrul said this week. 

Why?

"Because the company has only developed 9,000 hectares in 30 years of operation, while so many investors have expressed their interest to open nickel mine in the same area," Syahrul argued.

Will it hurt investment climate?

"I don't think so. If INCO keeps controlling such a huge concession, opportunities for competition will be limited, while so many investors want to develop the area," Syahrul said.

Well, this is interesting. INCO got the concession from central government. If local administrations manage to get what they wanted, probably Papua provincial administration will follow: asking Freeport Indonesia to give out 50% of its gold and copper concession. How about East Kalimantan on Kaltim Prima Coal or South Kalimantan on Adaro Indonesia? Believe me, lots of investors want to get even 10% of their concessions. BUT...

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Corporate actions update

PT Bank Artha Graha controlled by Tommy Winata & Sugianto Kusuma to issue new shares in a bid to strengthen the bank's capital. The 840 million shares are offered at nominal value of Rp110.88. As of August, the bank has total asset of Rp10.2 trillion.

Meanwhile PT Perusahaan Gas Negara (PGN) Tbk reported the delay of three months of commercial operation of South Sumatra West Java gas pipeline from initial schedule by December 2006. PGN argued the delay was mainly due to social problems, especially land acquisition, in its early stage of construction.
DIA Holdings, a minority shareholder of nickel producer PT Inco Tbk, plans to file lawsuit against CVRD (which acquired INCO Ltd in October 2006), PT Inco Tbk, and Bapepam.

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Inco & Phelps Dodge cancel the merger

Nickel giant Inco Ltd and Phelps Dodge agree to terminate the
Combination Agreement the parties entered into on June 25, 2006. Inco also
announced that it has cancelled the special meeting of Inco shareholders
called for September 7, 2006.


PT Inco Tbk, a subsidiary of Inco Ltd, with shares floating at Jakarta Stock Exchange (JSX). Inco shares price closed higher 4% on Wednesday trading at Rp23,050 or market capitalization of US$2.5 billion. Inco Ltd is the largest shareholder with 60.8%, followed by Sumitomo Metal Mining 20.09%.
According to Inco's statement to Toronto Stock Exchange on Wednesday, Sept 5, Inco will pay Phelps Dodge a termination fee of US$125 million today and a further US$350 million if Inco consummates an alternative take-over bid or similar transaction on or prior to September 7, 2007. Inco would have paid
these same amounts had the agreement been terminated after Inco shareholders
failed to approve the Phelps Dodge transaction at the special meeting.
Scott Hand, Chairman and Chief Executive Officer of Inco, stated: “It was
very clear from the proxies we received that Inco shareholders were not
going to support the Phelps Dodge transaction, so the two companies agreed
that it was in our respective best interests to move on.”
Following the termination of the Combination Agreement, Inco is no longer
restricted in its ability to solicit acquisition proposals from, provide
confidential information to or enter into negotiations or agreements with
interested parties concerning potential value enhancing alternatives. The
Board has authorized Inco’s senior management and its advisors to explore
these alternatives consistent with the company’s commitment to maximize
value to Inco shareholders. Inco also continues to be open to entering into
discussions or negotiations with Companhia do Vale Rio Doce (CVRD) with
regard to its offer of August 14, 2006.
Brazil's CVRD US$17.5 billion in cash for Inco while the merger value was predicted at US$17.7 billion.

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Rio Tinto's Lasamphala nickel project facing delay

Rio Tinto's US$1 billion nickel project in Lasamphala, Central Sulawesi is facing another delay as government agencies failed to settle the concession area and tax issue.

Simon Felix Sembiring, director general of Mineral, Coal & Geothermal at Energy Ministry confirmed the possible delay of working contract scheduled for signing this month.
"Rio Tinto is asking for guarantee that the concession area would not be converted into conservation forest. They want the guarantee is inserted in the contract but forestry ministry rejected that," he is quoted by Detik.com on Wednesday.
The government will charge a royalty of 3% of sales. Rio Tinto is planning to invest $1 billion in the nickel mine. With the new investment, the world's third largest mining company is expected to produce 46,000 metric tons of nickel and employ about 5,000 workers.
The Lasamphala mine is located on the border between Central and Southeast Sulawesi provinces.
Rio Tinto applied for the contract in 1999, but the application process slowed down when Indonesia's central government started to transfer various decision-making powers to regional authorities.
French-based company Eramet had also announced its plan to invest US$1.5 billion in developing nickel project in Moluccas Island.
The world demand for nickel is growing, driven by the market for stainless steel, which accounts for 54% of nickel consumption in the USA and more than 60% in other countries.
Nickel prices have increased tremendously in the last few years and that has led to many new exploration projects around the world. Nickel price increased from around US$7,000/ton in early 2004 to US$12,000/ton recently. Prices peaked at a 14-year high of $17,700 a ton in January 2006.
PT Inco Tbk is the largest nickel producer in the country.

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H1 2006 performance of listed companies

Indonesian listed companies reported mix results in their first half 2006 performance with majority of companies reported lower net profit on poor margin.


Sampoerna, sales +29.4%, profit +20.8%
Gudang Garam, sales +2.8%, profit –49%
BAT Indonesia, sales –4%, loss Rp16bn against profit Rp22bn

Unilever, sales +13%, profit +8.9%
SMART, sales +13%, profit +2,550%
Cahaya Kalbar, sales +193%, loss –97%
PT Perkebunan Nusantara III, sales +16.7%, profit +8.3%

Tunas Baru Lampung, sales –19%, profit +1,172
Budi Acid Jaya, sales +8.4%, profit +73.9%
Suba Indah, sales –90%, loss –90%

Bimantara, sales +22%, profit +2,550%
RCTI, sales +4.9%, profit +4%

Adhi Karya, sales +40.5%, profit –87%
Tigaraksa Satria, sales +14.5%, profit +185%

Astra International, sales –13%, profit –38%
Astra Otoparts, sales –20.4%, profit –28.9%
Astra Graphia, sales +14%, profit +50%
Prima Alloy, sales +17.8%, profit –81%

Semen Gresik, sales +24.9%, profit +106%
Kalbe Farma, sales +3.1%, profit +27%
Enseval, sales +2.4%, profit –6%
Excelcomindo, sales +48.5%, profit Rp358bn (against loss of Rp52bn)
Samudera Indonesia, sales +4%, profit –80%

Medco Energi, sales +26.5%, profit +17%
Bukit Asam, sales +10%, profit –9%
United Tractors, sales +16%, profit –3.4%

Gajah Tunggal, sales +14%, profit -38%
Tri Polyta, sales +15%, profit Rp92bn (against loss of Rp367bn)
Berlian Laju Tanker, sales +22.5%, profit +49.4%
INCO, sales +1.4%, profit -16.9%
AQUA, sales +1.6%, profit +6%

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Feni III shutdown, Antam missed target

PT Aneka Tambang (ANTAM) Tbk is forced to shutdown its newly built FeNi III smelter due to the leak from the metal tap hole late last week. That would cost Antam's ferronickel production target for 2006 a significant cut to 13,000 to 16,000 tonnes from the target of 19,000 tones.

ANTAM wrote to Australia Stock Exchange on Wednesday that it requires three months of FeNi III shutdown. Initially ANTAM planned the new plant's commercial operation by first quarter 2006 but delayed due to all conditions for conducting a final plant test had not been satisfied.
FeNi III is being built by a consortium of Mitsui & Co Ltd and Kawasaki Heavy Industries Ltd, Japan. Both companies are responsible for all work and testing prior to the commercial operation of the plant.
Antam's president director Dedy Aditya Sumanagara said, "We're extremely disappointed by this development as we had been operating FeNi III at capacity for one and a half months and were expecting to begin the final test and declare commercial operations at the beginning of July."
A full investigation is underway. No explanation from both Mitsui and Kawasaki on the accident.
The US$320 million FeNi III project involves the construction of a third smelter and new power plant in order to expand the Pomalaa ferronickel capacity from 11,000 tonnes of nickel contained in ferronickel to 26,000 tonnes. The FeNi III smelter will be built alongside FeNi I and FeNi II smelters in order to benefit from economies of scale.
The FeNi III plant will use nickel ore feed from Antam’s large nickel deposits in Buli, North Maluku and from a deposit adjacent to Pomalaa owned by PT Inco, known as East Pomalaa. The excavation of ore will be conducted by Antam or outsourced. Construction of the third power plant to power Antam’s entire ferronickel operation also began at the end of 2003 and will take 18 months to complete. The 102 megawatt plant includes the installation of six new diesel power generators and at the beginning of 2005 three of the generators will be operational, providing a more stable and efficient power load to the existing facility. Antam’s older plant with a capacity of 50MW, will be used for auxiliary and back up once the new power plant is operational. The new generators can run on fuel oil as well as natural gas. In June 2004, Antam signed an Operation and Maintenance (O&M) agreement with the builder of the new plant, Wärtsilä Corporation of Finland, for the operation and maintenance of Antam’s entire 152MW power facility.

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Eramet reaffirms Weda Bay project

Weda Bay, Halmahera in Molluca Islands will be Indonesia's next Soroako (giant nickel production facility run by International Nickel/Inco). France-based Eramet president Jacques Bacardats is in Jakarta this week to reaffirm the company's future plan for Weda Bay mineral project that may cost US$1.5 billion.

Early this month Eramet acquired controlling stakes of Weda Bay Minerals Ltd, an exploration and development company that
controls the Halmahera Nickel Cobalt Project at Weda Bay, Halmahera in Eastern
Indonesia. Halmahera is one of the largest undeveloped nickel projects
globally. State-owned mining company PT Aneka Tambang Tbk hold 10% shares in the project.
Simon Sembiring, director general for mining at the Energy and Mineral Resources Ministry told the press after the meeting between Energy Minister Purnomo Yusgiantoro and Bacardats that Eramet plans to produce nickel consentrates in Weda Bay. "But they might also produce nickel there, depend on the feasibility study," he said.
The plant in Weda Bay could produce up to 60,000 tones per year of nickel.
Eramet is an integrated mining and metallurgy group that produces non-
ferrous metals and their chemical derivatives, high-performance special
steels, nickel alloys and superalloys and high-performance parts for industry.
So far, Inco is the largest nickel producer in Indonesia through its Soroako, Sulawesi Island operation. Inco's installed capacity is around 70,000 tones of nickel consentrates per year and is working on US$250 million expansion project to boost the capacity by 30% to 90,000 tones/year.

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Inco booked US$268.9 million profit

Nickel producer PT International Nickel Indonesia (INCO) Tbk booked net profit of US$268.9 million in 2005, slightly decreased by 5.6% from US$284.43 million in 2004.

According to its audited financial report published in some newspapers today, INCO reported total sales of US$885.08 million in 2005, an increase of 11.7 percent from US$792.08 million in 2004. But the company's costs of goods sold increased higher by 23.8% from US$357.17 million to US$442.63 million. As a result, INCO's gross profit only slightly grew to US$442.45 million from US$434.9 million in 2004.

The company's operation costs also increased significantly from US$17.5 million to US$20.69 million to give INCO operating profit of US$421 million against US$417 million in 2004.

But the write-off on some fix assets with the loss of US$27.99 million is the main reason behind the net profit slip.

INCO recorded total assets of US$1.64 billion as of December 31, 2005, slightly increased from US$1.62 billion in 2004 with liabilities of US$353 million only. The company's retained earning was US$850.25 million as of December 2005. INCO Ltd owns 51% shares in PT INCO Tbk.

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Inco temporarily suspend groundwork of a dam project

PT International Nickel Indonesia Tbk (Inco) announced late last week that it will temporarily suspend the groundwork at the site of its planned new dam at Karebbe on the Larona River, Sulawesi Island, pending the receipt of certain forestry related approvals amending the existing permit issued by the ministry of forestry.
This dam project is part of Inco's long term plan to increase its annual production capacity to 200 million pounds of nickel in matte by 2009. Last year, the company was targeting total output of 165 million pounds of nickel in matte.
The dam is expected to raise Inco's hydroelectric generating capacity by 33% annually, or 90 Megawatts, while reducing energy supply in years of low rainfall. Currently PT Inco's energy source is a combination of hydropower and fossil fuel power generators. It operates two dams, the Larona and Balambano. Larona has three generators at 67 MW each, while the Balambano has two generators at 68.5 MW each. The fossil fuel power generators only have combined capacity of 48 MW.
Inco reported in October the unaudited sales of US$219.4 million in the third quarter 2005, a 5.8% from US$232.8 million in the same quarter 2004. Net earnings in the quarter ended September 30, 2005 were US$73.2 million, down 16.8% from US$87.9 million in the same quarter 2004. Inco Limited, Canada, owned 60% shares of PT Inco with processing units in Soroako, Sulawesi Island.

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Inco will build hydro powerplant

Nickel producer PT International Nickel Indonesia Tbk (PT Inco) will build a 90 MW hydro power plant in Karebe, Sulawesi island, Indonesia in its effort to boost nickel production capacity, Investor Daily, Jakarta newspaper, reported today.
The company is predicting total investment of US$150 million for the power plant.
Inco is preparing to lift nickel production by 25% in 2009 with total investment of US$250 million. The company is looking for additional funding of at least US$200 million.
PT Inco is owned 61% by Inco Ltd, the leading nickel producer in the world.

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