Generating Higher Returns Better Future
Annual Report
for a Generating Higher Returns Better Future Fo r t h e Ye a r 2 0 0 7Nickel Exports Increase Significantly Please see Review of Operations, page 69 Please see page 71 Please see pages 63, 80 Please see page 50 Cash Soars 317%; Antam is Poised to Invest and Grow
A S X : AT M • I D X : A N T M Farewell Letter from the President Director
10 Reas ons to In vest in A ntam
Net Profit Surges 231%
1 Diversified.
Vertically- Integrated.
4 Low cost operations
5 Unique position to lower ferronickel costs through fuel conversion.
Exciting project pipeline, to move downstream into more value-added processing activities.
For more information please see Acquisitive Growth Projects, page 83.
9 Targeted gold acquisition program.
For more information please see Cash Costs and Cost Reduction Program, page 77.
For more information please see Cost of Sales, page 74.
Indonesian. Experienced.
(current cash costs for ferronickel are average).
For more information please see Our Products and How We Make Them, page 105.
Bauxite. A great mix.
2 Gold. Nickel.
For more information please see Detailed Description of Antam, page 103.
I N v E S t O R A l E R t ! Why
You nee d to loo k he re. It’ll onl y ta ke t hree min utes ...
8 For more information please see Organic Growth Projects, page 81.
Why Antam?
Large high quality reserves
3 and resources of nickel and bauxite.
For more information please see Exploration and Reserves, page 96.
Possible Industry-beating
6
7 ferronickel
margins and
production returns.For more information please see Our Competitors, page 109. increase over next few years.
For more information please see Production Volume Targets, page 45.
Big dividends, lots of cash and
10 strong financial position to make investments.
For more information please see Financial Review, page 61.
2 0 0 7 A N t A M A n n u a l R e p o r t
www.antam.com
It is the mission of this annual report to create a clear and
positive picture of the company without distorting the truth,
to keep our stakeholders informed.
If there is ANY part of this report that requires further
clarification, please do not hesitate to send our IR team an
email ([email protected], [email protected],
[email protected], [email protected]). We actually
prefer to have an ongoing dialogue with you and hopefully
this report is only the beginning...
2007 Antam Annual Report www.antam.com
THE INVESTMENT CASE FOR ANTAM
81 NICKEL
93 PT DAIRI PRIMA MINERAL
93 PT CIBALIUNG SUMBERDAYA
92 PT GALUH CEMPAKA
84 BLUE SKY: EXISTING MINORITY- STAKE JOINT VENTURES PT NUSA HALMAHERA MINERALS
83 CAPITAL EXPENDITURE PLANS
83 ACQUISITIVE GROWTH PROJECTS
82 IRON, NICKEL CONTAINED IN PIG IRON
81 ALUMINA
94 EXPLORATION AND RESER VES SUMMARY TABLES OF RESERVES AND RESOURCES
80 ORGANIC GROWTH PROJECTS
78 INVESTING FOR A BETTER FUTURE OUR FUTURE TARGETS
78 PERFORMANCE MEASUREMENT AND OUTLOOK
77 LICENSING
76 CASH COSTS AND COST REDUCTION PROGRAM
74 NET INCOME
71 COST OF SALES
94 PT WEDA BAY NICKEL
96 NICKEL
70 SALES AND SEGMENT INFORMATION
143 SUSTAINABILITY REPORT STAKEHOLDERS’ INVOLVEMENT
IR CONTACT INFO AND CALENDAR 203
GLOSSARY 199 CORPORATE IDENTITY 202
INSTITUTIONS AND SUPPORTING PROFESSIONALS 198
153 CONSOLIDATED FINANCIAL STATEMENTS 154 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 159 CONTACT US KEY PERSONNEL AND BUSINESS UNITS 197
152 OPINION LETTER FROM ERNST & YOUNG
148 ANTAM TO PURCHASE GREEN ENERGY 149 AUDITING ANTAM SIGNED LETTER ATTESTING TO VERITY OF FINANCIAL STATEMENTS
146 ENVIRONMENTAL PERFORMANCE 146 SOCIAL PERFORMANCE 147 ANTAM FUNDS A LOCAL CRAFTSMAN
140 ADOPTION OF THE INDONESIAN CODE OF GOOD CORPORATE GOVERNANCE
97 DETAILED NICKEL RESERVES AND RESOURCES TABLE
125 ADOPTION OF THE ASX CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS
120 REPORTS FROM THE COMMISSIONER-LEVEL BOARD COMMITTEES
114 RISK STATEMENT 115 CORPORATE GOVERNANCE OF ANTAM ASSESSMENT OF ANTAM’S CORPORATE GOVERNANCE REPORT 118 STATEMENT ON THE STATUS OF CORPORATE GOVERNANCE PRACTICES
112 HOW WE MANAGE RISK
109 OUR COUNTRY AND GOVERNMENT 110 OUR INDUSTRY 110 SWOT ANALYSIS
105 OUR PRODUCTS AND HOW WE MAKE THEM 105 OUR CUSTOMERS AND MARKET SHARE 108 OUR COMPETITORS
101 NOTES TO RESERVES AND RESOURCES ESTIMATIONS 102 DETAILED DESCRIPTION OF ANTAM HOW WE MAKE OUR MONEY 104 OUR STRATEGY TO GROW 104 OUR STRUCTURE
98 GOLD DETAILED GOLD RESERVES TABLE 100 BAUXITE DETAILED BAUXITE RESERVES AND RESOURCES TABLE
71 PRODUCTION AND SALES
67 REVIEW OF OPERATIONS: GENERATING HIGHER OUTPUT DETAILED PRODUCTION AND SALES TABLE
10 YEAR FINANCIAL HIGHLIGHTS
17 A WELL GOVERNED STATE-OWNED ENTERPRISE
28 SHAREHOLDERS INFORMATION
24 ANTAM SHARES AND SHAREHOLDERS MARKET OVERVIEW
23 MAP OF OPERATIONS AND PROJECTS
22 THE OUTLOOK
20 OUR RISKS AND CHALLENGES
19 EXCITING PROJECTS
18 EXTERNAL RECOGNITION AND CERTIFICATION
16 OUR RESERVES
30 DIVIDEND POLICY
14 OUR STRATEGY
13 2007: A GREAT YEAR (CALENDAR OF SIGNIFICANT EVENTS)
12 DELIVERING SIGNIFICANT SHAREHOLDER RETURNS
10 OUTPERFORMING OUR PEERS
8 AN AMAZING YEAR OF GROWTH
7 WHO WE ARE: ANTAM DESCRIBED
4 WHY WE DO WHAT WE DO: OUR MISSION AND VISION
28 TOTAL SHAREHOLDER RETURNS
31 INVESTOR RELATIONS
66 HEDGING ACTIVITIES
53 BOARD OF DIRECTORS’ BIOGRAPHIES
65 CASH FLOWS
64 CAPITAL STRUCTURE AND ACCESS TO CAPITAL
63 TOTAL CONSOLIDATED LIABILITIES
62 TOTAL CONSOLIDATED ASSETS
58 FINANCIAL REVIEW: HIGHER PROFITS ABRIDGED FINANCIAL STATEMENTS
56 OUR HUMAN RESOURCES
55 Q&A WITH THE BOARD OF DIRECTORS
52 BOARD OF COMMISSIONERS’ BIOGRAPHIES
32 INVESTOR PERCEPTION SURVEY
50 ANTAM’S PEOPLE THE MANAGEMENT
49 FAREWELL LETTER FROM CEO
42 DIRECTORS’ STATEMENT
41 LETTER FROM THE BOARD OF DIRECTORS
38 COMMISSIONERS’ STATEMENT
36 DEAR SHAREHOLDER LETTER FROM THE BOARD OF COMMISSIONERS
35 Q&A WITH OUR LARGEST SHAREHOLDER
34 DIRECT FEEDBACK FROM YOU
Table of Contents
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-
Higher Profits
4 Financial Highlights Billion Rupiah
Description 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007/2006 %
Net Sales 1,021.91 966.15 1,566.15 1,735.22 1,711.40 2,138.81 2,858.54 3,251.24 5,629.40 12,008.20 113 Cost of Sales 450.75 547.73 860.28 1,122.93 1,280.48 1,471.91 1,497.70 1,827.14 2,887.94 4,794.96 66 Gross Profit 571.16 418.42 706.03 612.29 430.92 666.90 1,360.83 1,424.10 2,741.47 7,213.24 163 Earnings Before Interest, Tax, Depreciation and Amortization 386.54 392.47 661.63 262.81 364.96 466.18 1,317.77 1,394.60 2,778.43 7,724.80 178 Income from Operations 475.33 318.02 537.28 126.29 247.42 447.98 1,096.57 1,099.77 2,403.69 6,796.09 183 Interest Expense Net Income 299.36 234.34 383.16 118.91 177.40 226.55 810.25 841.94 1,552.78 5,132.12 231 54.56 29.04 25.42 19.00 13.20 16.73 2.20 25.56 141.96 74,315 (48) Outstanding Shares (‘000) 1,230,769 1,230,769 1,230,769 1,230,769 1,907,692 1,907,692 1,907,692 1,907,692 1,907,692 9,538,460 400
Adjusted Net Income per Share (Rp)* 31.38 24.57 40.17 12.47 18.60 23.75 84.95 88.27 162.79 538.04 231 Adjusted Dividend per Share (Rp)* 13.40 9.44 20.09 6.23 6.88 7.72 29.62 30.01 65.12 - - Total Assets 1,976.84 2,055.25 2,516.34 2,577.32 2,525.03 4,326.85 6,042.64 6,402.71 7,290.91 12,037.92 65 Total Liabilities 589.85 598.01 757.00 890.63 843.86 2,543.33 3,600.18 3,373.07 3,009.30 3,273.12 367.03 251.61 236.88 171.86 80.90 1,664.64 2,072.45 2,593.66 1,829.78 1,474.30 19 9 Total Long Term Debt Total Stockholder’s Equity 1,376.35 1,447.65 1,750.31 1,680.48 1,675.48 1,783.51 2,442.47 3,029.64 4,281.60 8,763.58 105
- *Calculations of Net Income per Share and Dividend per Share from 1998 to 2006 are adjusted using 2007’s post stock-split outstanding shares of 9,538,459,750. Net Working Capital 472.13 452.50 763.04 874.30 827.99 2,100.12 2,064.93 1,308.11 2,138.09 6,249.28 192
Our performance for the last 10 years As our Net Sales CAGR exceeded our We pay generous dividends. The
has been consistent and robust. costs CAGR, we posted Net Income CAGR of our dividend payment per
The Compound Annual Growth Rate CAGR of 37% from 1998-2007. share increased by 49% from 1998
(CAGR) of Net Sales from 1998 to to 2006. 2007 is 31%, while Cost Sales CAGR during the same period is 30%.2007 Antam Annual Report www.antam.com
and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us Exploration Detailed Corporate
5 “We have consistently delivered industry-topping performance and growth.”
Description 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007/2006 % Return on Average Investment 23.51% 19.94% 27.10% 5.70% 9.55% 11.17% 31.70% 32.33% 45.41% 81.99% 23.95% 16.60% 23.96% 6.93% 10.57% 13.10% 38.35% 30.77% 42.48% 78.69% 85 81 Return on Average Equity Return on Average Assets 16.73% 11.62% 16.76% 4.67% 6.95% 6.61% 15.63% 13.53% 22.68% 53.11% 134
Current Ratio 298.58% 254.96% 253.93% 292.69% 293.09% 568.03% 326.33% 267.83% 281.27% 447.41% 59 Total Liabilities to Equity 42.86% 41.31% 43.25% 53.00% 50.37% 142.60% 147.40% 111.34% 70.28% 37.35% (47) Total Liabilities to Assets 30.17% 29.10% 30.08% 34.56% 33.42% 58.78% 59.58% 52.68% 41.47% 27.19% (34) Gross Margin 55.89% 43.31% 45.08% 35.29% 25.18% 31.18% 47.61% 43.80% 48.70% 60.07% 23 Operating Margin 46.51% 32.92% 34.30% 7.28% 14.46% 20.95% 38.36% 33.83% 42.70% 56.60% 33 Net Margin 29.29% 24.26% 24.46% 6.85% 10.37% 10.59% 28.34% 25.90% 27.58% 42.74% 55 Operating Cashflow 539.65 218.86 825.48 385.51 250.16 481.18 768.95 742.34 1,711.30 4,835.91 180 Capital Expenditure 398.61 142.57 98.82 90.11 103.30 635.99 1,364.36 1,436.16 85.61 197.16 130 Free Cashflow 141.04 76.29 726.66 295.41 146.86 (154.80) (595.41) (693.82) 1,625.69 4,638.74 189 Exchange Rate (Rp/US$)** 10,224 7,848 8,405 10,256 9,316 8,570 8,935 9,712 9,167 9,136
Gold Price (US$/t.oz)** 294.26 278.87 279.18 271.35 310.57 364.06 409.87 446.14 604.65 697.09 15 **Annual Average of Daily Spot Price. Nickel Price (US$/Lb)** 2.09 2.74 3.92 2.71 3.08 4.37 6.27 6.45 10.96 16.85 54 In line with our consistent performance, Our Total Liabilities to Assets jumped Our free cash flow turned negative in we posted Return on Average Equity significantly in 2003 due to the 2003 as we constructed FeNi III, our CAGR of 14% from 1998 to 2007. bond issuance to finance FeNi III. latest expansion mode. In 2006, our
In 2005 we started to buy back the free cash flow turned positive again as bonds in the open market. In 2006, FeNi III construction came to an end. we fully redeemed the bond before maturity due to the cancellation of Indonesia-Mauritius Avoidance of Double Taxation Agreement.
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-
Higher Profits
6
RETURN ON AVERAGE OPERATING CASH FLOW DEBT TO EQUITY
(Billion Rupiah) (%)
EQUITY
79
(%)
4,835
93
85
42
65
38
31 1,690
31
13 742
769
10
481
04
03
05
06
07
03
04
05
06
07
03
04
05
06
07 The main measurement of value The operations were producing A supreme performance achieved other peers. Antam for the next phase of growth. creation, our 2007 ROE beat most substantial free cash and prepared with little to no debt.
EARNINGS BEFORE INTEREST, REVENUE PER SEGMENT OPERATING INCOME TAX, DEPRECIATION
(Billion Rupiah) PER SEGMENT
303 AND AMORTIZATION
(Billion Rupiah)
6,968
(Billion Rupiah)
158 1,163 10,687 188
205 7,725
2,524 690
4,734 190
80 166
169 589 1,221
526 1,118
112 2,778 2,472
2,167 554 154
1,318 1,395 1,473 415
466
- 25 -10 -12 -21 -102
03
04
05
06
07
03
04
05
06
07
03
04
05
06
07 Nickel Gold Others Nickel Gold Others
Antam’s EBITDA soared as cash 2007 Antam Annual Report www.antam.com gushed from the operations. nickel to soar. Higher prices and higher volumes caused revenue from nickel prices caused income to reach new heights. Nickel is the main income earner. Never seen before
and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us Exploration Detailed Corporate
7 Why We Do What We Do: Our Mission and Vision
Vision 2010 To be a mining company of international standards with a competitive advantage in the global market.
Mission To provide high quality products of nickel, • gold and industrial minerals with the utmost concern for work safety and health as well as environmental conservation.
To operate in the most efficient manner (low • cost operations).
To maximize shareholder and stakeholder • value.
To enhance employees’ welfare. • To participate in efforts to improve the social • welfare of communities in the vicinity of the mining areas.
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures
the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-Higher Profits
8 Who We Are: Antam Described
DIVERSE PRODUCT MIX
We are a diversified, Indonesian, state-owned, vertically integrated, mining and metals company. Our main strengths are our low cost operations, our vast high quality reserves of nickel and bauxite, our
1%
strong financial structure, our nearly forty years of experience, our location in mineral-rich Indonesia,
9%
our vast acreage of licensed exploration territories, and our loyal and dedicated staff. Our main
1%
commodities are nickel, gold and bauxite. With a recent nickel expansion and due to price increases, most of our revenues are now related to nickel. Our main goal is to create shareholder value by getting bigger and better and doing it in a sustainable and correct way. Our main strategy is to extract as much
41% 48%
value as possible from our existing reserves by moving downstream from exporting ore into processing activities. We are also keen to diversify away into other commodities as long as there is a good return and a match with our business. In general we are only interested in Indonesian assets as the returns are higher and we can benefit from our domestic knowledge and experience.
We currently produce and export around 5.5 – 7 million wet metric tons of nickel ore, around 17,000 Ferronickel
- – 18,000 tonnes of nickel contained in ferronickel, 100,000 – 115,000 troy ounces of gold, 700,000
Nickel Ore
- – 800,000 ounces of silver and 1.2 – 1.5 million wmt of bauxite. As our strategy is implemented in the upcoming years we expect to see ore exports come to a halt, with our ferronickel production
Gold increasing and the commencement of alumina production, which uses bauxite as ore feed. In Bauxite general we have amongst the lowest operating costs in the business, except for our ferronickel Silver operations. Ferronickel costs have come up due to the removal of national fuel subsidies and rising international prices. However, we will convert to a lower cost fuel and regain our low cost position. Our customers are mostly long term and bluechip international companies, located in North Asia Our upcoming investments will diversify our revenue away from the current dominance and Europe. About half of our gold and silver is sold domestically. of nickel.
We are financially prudent and like to have very little debt and large cash holdings. Only when the time is right will we leverage the balance sheet to invest and grow. We are 65% held by the Indonesian government, with the other 35% held by the public. Most of the public investors are long term large, foreign institutional investors. Although recently the amount of domestic institutional, as well as retail investors, has been increasing.
EXPORT ORIENTED*
billion Rp5,793 Japan Korea India Europe Taiwan nickel nickel Ferro Ferro Rp125 billion billion
Rp4,769 China e Sa Japan p it Eastern Europe n ro o lit im e l te Go xi ld Bau Rp1,034 billion billion Indonesia Jewelers Singapore
Rp130
Japan 2007 Antam Annual Report www.antam.com China product and destination *The graphic depicts sales revenues by9 Exploration and Reserves Detailed Description of Antam Risk Management Corporate Governance of Antam Sustainability Report Auditing Antam Contact Us
1
2
3
4
5 Nickel is a metallic element which is sold in many forms such as cathode, granules, shots and ingots. About 85% of metallic
nickel is used in combination with other metals to make what are known as alloys. Nickel-containing alloys are highly regarded for their superior combinations of toughness, strength, and corrosion resistance, and their ability to retain these properties at extremes of temperature. About 65% of nickel is used to make stainless steel which is the ideal base material for commercial applications. Stainless steel is used in cutlery, industrial equipment, structural alloys in automotive and aerospace assembly and building material in skyscrapers and other large buildings. Gold is a precious metal which, for many centuries, has been used as money, as a store of value and in jewelry. Modern industrial uses of gold include dentistry and electronics.
Reference: Wikipedia
1. Jet engines rely on the sturdiness and non corrosive characteristics of nickel plated stainless steel material.
2. The Chrysler Building was made using 316L stainless steel and is a testament to the anti-corrosive properties of high quality 300 series stainless steel.
3. The second most important usage of nickel is batteries, a key growth area.
4. Antam’s .9999 fine gold is internationally accredited.
5. The heat resistant nature of nickel protects and strengthens the engine block.
4
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-
Higher Profits
10 An Amazing Year of Growth By all accounts 2007 was an amazing year. Due to a substantial increase in our output of nickel contained in ferronickel (despite a leak at FeNi III smelter) and almost doubling our nickel ore exports in combination with record breaking nickel prices, we produced more cash, made more profit, created the largest margins, than we ever have before. We will look back at 2007 as the year that laid the foundation for the next expansion. As well as increasing profits, 2007 was also an amazing year in terms of breaking into the Chinese nickel ore market and in terms of forging new alliances and partnerships with China. We signed many agreements, some of which we acknowledge will come to nothing, but offer the best way to ensure we are finding the best partners and executing the best development plans for our large reserves and resources. While we do not expect 2008 will be as profitable as 2007, it will be equally as important in terms of executing our growth plans and make important investments to grow, such that in three to five years time the profit levels of 2007 will not be considered amazing, they will be considered normal. We generated amazing returns in 2007 so we can build a better future for tomorrow.
PRODUCTION AND SALES Unit 2006 2007 2007/2006 (%) Production Volume Ferronickel metric ton Ni 14,474 18,532
28 Saprolite Nickel Ore wmt 3,493,961 6,744,383
93 Gold kg 2,873 2,791 (3) t.oz 92,367 89,733 (3) Sales Volume Ferronickel metric ton Ni 13,389 17,723
32 Saprolite Nickel Ore wmt 3,375,466 6,463,977
91 Soaring Chinese nickel demand pushed Gold kg 1,458 5,000 157 Antam’s nickel ore sales up by 91% year t.oz 46,876 160,754 157 on year.
2007 Antam Annual Report www.antam.com
Exploration Detailed Corporate and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us
11 An Amazing Year of Growth
REVENUES AND PROFITS SOAR REVENUES AND PROFITS HIGHLIGHT 12,000 11,500 10,000 10,500 11,000 12,008 n 7,000 7,500 8,000 8,500 9,500 9,000 p R B il li o 6,000 5,500 6,500 5,00
5,132 2,50 3,00 3,50 4,00 4,50 4,795 1,00 1,50 2,00 50 2003 2004 2005 2006 2007 Net Income Cost of Sales Net Sales
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-
Higher Profits
12 Outperforming Our Peers
Often we are unfairly assumed to be an underperformer. Perhaps this is due to the sometimes poor image of Indonesian state-owned enterprises as being sluggish, lacking competence and perhaps corrupt. As well, the ramp up of our FeNi III smelter has experienced a couple of setbacks with a leak in 2006 and a leak in 2007. Every new furnace leaks, and ramp ups to optimal capacity will take many years, but the expectations were high and many assumed FeNi III would quickly reach full capacity. As well, as we find the best partners and plans for developing our vast reserves into the most value creating operations, we have signed many agreements, some of which expired, leaving some to suggest all we do is sign non-binding agreements and we need to speed up our development projects.
Some have said our excellent profit growth over the past couple of years is simply due to the unexpectedly high nickel prices; that we had gotten lucky. The reality is that over the past number of years, well before the commodity boom began and during the construction period of FeNi III, we have consistently outperformed our peers, who also were beneficiaries of high commodity prices. The numbers, as you can see below, speak for themselves. Our plan is to continue to deliver industry beating performance.
Top 40 Global Antam Indonesian Key Ratios Companies Mining
Companies
2005 2006 2005 2006 2005 2006 2007
Ebitda Margin 37% 44% 43% 41% 41% 49% 64% Net Profit Margin 23% 27% 23% 23% 26% 28% 43% Return on Equity* 26% 33% 37% 39% 31% 42% 79% Debt to Equity
32% 36% 49% 47% 40% 31% 10% *Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period.
Source: PricewaterhouseCoopers, Antam Antam
Key Ratios Australian Miners
Indonesian
Miners
Average 10 years Average 10 years Average 10 years
(1997-2006) (1997-2006) (1997-2006)
Ebitda Margin NA 39% 35%
Net Profit Margin 12% 16% 20% Return on Equity* 12% 19% 22% Debt to Equity NA 115% 37% *Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period. 2007 Antam Annual Report www.antam.com Source: PricewaterhouseCoopers, Antam
13 Exploration and Reserves Detailed Description of Antam Risk Management Corporate Governance of Antam Sustainability Report Auditing Antam Contact Us
2006 2007 Change % Earnings Per Share* 162.79 538.08 231 Dividend Per Share* 65.116 To be decided in AGM - Average Price Earning Ratio
11.7 9.0 -23 Delivering Significant Shareholder Returns
5 YEAR QUARTERLY SHARE PRICE AND TRADING VOLUME Share Price Volume
1,000 500 2003 2004 2005 2006 2007 2008 Rp million Rp 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 EPS hiked more than double in line with robust production and sales as well as a strong commodity market.
What it all boils down to for most investors is the shareprice and dividend performance of their different investments, something that is reflected in the calculation of total shareholder returns. We had a record year in terms of generating total shareholder returns, which increased to 180% or Rp2,920.12. Our shareprice rose 176% to end the year at Rp4,475. This compares with total shareholder returns of 126% or Rp910.01 in 2006. As in the preceding two years, our share price outperformed the Indonesian Stock Exchange, every major international index and all major mining indices. As in every year since listing on the Indonesian Stock Exchange in 1997, we returned value to our shareholders by way of a generous cash dividend. We paid a cash dividend in the amount of Rp621 billion, or 40% of our net profits after tax for the year ended December 31st, 2006.
Trading Volume Share Price
PER SHARE DATA
- Retroactive effect after stock split.
SOME OF OUR ANALYSTS
Shares in Issue 9,538,459,750 Market Capitalization Rp42.7tn (US$4.54 billion) Share Price Range Rp1,400-5,050
Average Share Price Rp2,742 Trading Volume 21.17 billion Average Daily Volume 86 million
Major Shareholder: Government of Indonesia (65%) Substantial Shareholders: MS + Co Inc CA (3%) Final Dividend Payment Date: July 6th, 2007 Final Dividend Amount: Rp325.58/share (Rp65.116/share after stock split) A$0.215428/CDI (A$0.0430856/CDI after stock split)
35(27) Hold 15(33)
Sell
: Adam Worthington Macquarie Daisy Suryo Merrill Lynch Andreas Bokkenheuser UBS Cherie Khoeng Deutsche Bank Ahmad Solihin CLSA Isnaputra Iskandar Danareksa Jerome Jovellana Mandiri Achmad Syafriel Bahana Stefanus Darmagiri UOB Yusuf Ade Winoto DBS Ricardo Silaen Kim Eng David Fergusson Citigroup Ami Tantri JP Morgan Haider Ali Credit Suisse Rania Rahmundita CIMB Christine Salim Samuel Norico Gaman BNI Felix Sindhunata Mega Capital Adrian Rusmana HD Capital Triwira Juniarta NISP
Bloomberg Terminal “Entries” Buy
ASX Fillings Bloomberg Articles
ANALYST AND MEDIA COVERAGE (2006 in parenthesis) Reports Analysts Press Releases
15(17)
19(20) 23(16) 61(43) 275(229) 577(541)Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-
Higher Profits
14 2007: A Great Year
February 12th February 5th
Over twenty companies Antam sends aids to
January 29th February 23rd
flood victims in Jakarta. participate and there FeNi III commercial
Antam and BHP Billiton are 3 winners. Antam operations begins. establish alliance to develop holds tender to sell 2 Halmahera nickel deposit. million wmt of nickel ore to China.
March 12th June 5th
Antam and partners form May 30th Antam raises saprolite June 18th joint venture company for
Antam pays cash nickel ore reserves and Antam lowers power the Tayan chemical grade dividend of Rp621 billion resources by 61% to load of FeNi III smelter alumina project. or Rp65.116 per share 180 million wmt. due to small metal leak. (adjusted for stock split).
Share Price Rp
5,000 4,000
1
2
3
4 3,000 2,000 1,000 2007 Antam Annual Report www.antam.com Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07
15 Exploration and Reserves Detailed Description of Antam Risk Management
Corporate
Governance of Antam Sustainability Report Auditing Antam Contact Us 200 400 600 800 1,000 1,200III smelter following the completion of partial repairs.
Antam sends aids to earthquake victims in Bengkulu and West Sumatera.
September 21st
Antam signs an agreement with Tsingshan of China to conduct a feasibility study of jointly developing a stainless steel facility.
October 31st
Antam stock split at a ratio of 5:1.
July 12th
Rp million
June 4, Antam Studies Plan to Triple Nickel Output by 2012 June 5, Indonesia May Take Back Parts of Coal, Metal Areas June 19, Aneka Tambang Smelter Has Second Leak; Keeps Target June 21, Indonesia May Change Mining Law to Suit Investors July 17, Indonesia Rules Out Ore Export Ban, Consider Taxes 1 2 3 4 5
Antam switches on FeNi
Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 August 1st
August 26th
Antam appoints Macquarie as financial advisor to advise and assist in relation to Antam’s project pipeline as well as in relation to acquisition advisory.
September 11th
Antam and UC Rusal sign a heads of agreement to develop bauxite deposit in Indonesia.
September 6th
15MW low impact hydro power plant.
Antam to lower its nickel power cost by up to 8- 10% through the use of
September 21th
Mining activities at Pongkor gold mine continue to run at normal level after mining accident.
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5 Volume
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures
the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-Higher Profits
16 Our Strategy: How We’re Growing Value
Our strategy is as effective as it is simple. We will create maximum shareholder value by continuing to diversify horizontally into other commodities where suitable, while also continuing to focus on those commodities we know best, which are nickel, gold and bauxite. We will diversify through an active exploration program and through strategic acquisitions.
We will also maintain a diversity of customers so as to not be overly reliant on any one market. We will also continue to diversify vertically by moving downstream in order to increase the value- added of our operations. While some of the bigger international mining companies have claimed they will now start to move upstream, they are moving from now lower margin refining back into smelting, or from packaging to refining. We are moving downstream to the first level of processing where the increased value is substantial. Later on, if it makes good business sense, we will move further downstream, such as from ferronickel to stainless steel. We have focused on nickel, gold and bauxite in the past and this has proven to be a winning combination. Our results in 2007 are largely due to the increased value that came from moving more downstream by building additional ferronickel capacity.
We will focus on mines and deposits in Indonesia as not only do we benefit from our knowledge of Indonesia, but the industry in general has higher returns than elsewhere. However we will actively seek international partnerships with world class mining companies to best develop our vast reserves in the most efficient, profitable and correct way. We will engage the rise of China and increasingly India by seeking to form partnerships with Chinese companies, viewing China as an opportunity not a threat.
We will continue to be a low cost operator and holder of large reserves and resources and continually strive to improve in these areas. We will also continue to not overly burden our balance sheet and take a prudent approach to making investments, which must generate a return of at least 15%.
CASH COST, PRODUCTION COST AND AVERAGE SELLING PRICE
Unit 2006 2007 2007/2006(%)
Cash Cost Ferronickel US$/lb4.40
5.55
26 Saprolite Nickel Ore US$/wmt
20.15
20.32
1 Gold US$/t.oz 283.93 383.10
35 Production Cost Ferronickel US$/lb
6.00
6.99
17 Saprolite Nickel Ore US$/wmt
20.32
20.48
1 Gold US$/t.oz 375.36 481.74
28 Average Selling Price Ferronickel US$/lb
10.12
16.16
60 Saprolite Nickel Ore US$/wmt
55.36
82.43
49 Gold US$/t.oz 611.59 702.63
15 Our ferronickel cash cost rose due to higher ore feed costs and higher fuel prices. We will lower costs by converting to a lower cost fuel.
2007 Antam Annual Report www.antam.com
and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us Exploration Detailed Corporate
17 What it All Boils Down to: Our Reserves
Without reserves, a mining company is nothing. Unlike other businesses, the life of a mining company can be very easily determined, based solely on the size and quality of its reserves. Our reserves are the basis of our strategy. All the other strategies stem from the decisions we make about how we can create the most value from our existing large reserves and resources. The reserves of our gold, one of our three core commodities, are dwindling and so we are actively seeking to discover or acquire more gold. Without having good knowledge of your reserves, subsequent planning will be misguided. For this reason, and also to fulfill a listing requirement of the ASX, every year we estimate our reserves according to the JORC Code, which is determined by the Australasian Institute of Mining and Metallurgy.
MINERAL RESOURCES AND ORE RESERVES (‘000 wmt)* Commodity Quantity Change (%) 2006 2007 Saprolite Nickel 179,850 180,900
1 Limonite Nickel 185,150 214,200
16 Gold 3,863 3,973
3 Bauxite 84,400 81,600 (3) PROVED AND PROBABLE RESERVES (‘000 wmt)*
Commodity Quantity Change (%) 2007
2006 Saprolite Nickel 63,900 55,100 (14) Limonite Nickel 51,450 50,150 (3)
The 14% decrease of nickel reserves is Gold 2,882 3,026
5 largely due to production. The 13% decrease of bauxite reserves is due to a portion being
Bauxite 84,400 73,100 (13) reclassified as indicated resources.
- Based on the Competent Person’s report. Figures as per December 31, 2007 (inferred resources were included in gold estimation).
Please see detailed tables in the Exploration and Reserves section.
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-
Higher Profits
18 A Well Governed State-Owned Enterprise We take corporate governance extremely seriously. Firstly, because we believe good corporate governance is a good business decision. Especially for a mining company in Indonesia, behaving in a clear, consistent, fair, accountable, responsible way will yield the highest and most durable profits. As well, important aspects of the business, such as raising capital, to finding partners, to securing favourable terms with our suppliers can all benefit from being a well governed company.
Secondly, it’s simply about operating ethically; about doing the right thing, about making good profits, but also about giving back to the communities we operate, in ways other than just generating economic development. We want to be a partner with the communities we are in and work together with them for the best possible outcomes.
2007 Antam Annual Report www.antam.com
and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us Exploration Detailed Corporate
19 External Recognition and Certification
Annual Report Award 2006
- Ranked 1st Overall • Ranked 1st SOE Non Finance Category
League of American Communication Professionals (LACP) 2006 Vision Awards Annual Report Competition
- Platinum Winner (Materials Category)
- Gold Winner (Best In-House Report Category)
- Ranked 11th from over 2,500 international entries
Asia’s Best Companies 2007 – FinanceAsia
- Best Managed Company (rank 6th)
- Best Corporate Governance (rank 5th)
- Best Investor Relations (rank 2nd)
- Most Committed to a Strong Dividend Policy (rank 6th)
Ranked in the 50 Top Reports from around the world as compiled in the Annual Report on Annual Reports, the international contest run by Europe’s E.Com, the only Indonesian firm to do so. The Best Corporate Governance Practices in the Small/Mid Cap Category in Asia/ Pacific by Technical Criteria - IR Global Rankings Top Performing Listed Company – Investor Award 2007 Overall Third Best Company in Indonesia – Corporate Governance Poll 2006 – Asiamoney Gold Medal in 2007 International Conference on Quality Control Circles, Beijing.
Case for Antam and Shareholders Dear Shareholder Antam’s People Generating Higher Output for a Better Future Stake Joint ventures the Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority-
Higher Profits
20 Exciting Projects
ORGANIC GROWTH PROJECTS
Project Product Location
Volume Status Operational Year PT Indonesia Chemical Alumina Chemical Grade Alumina Tayan, West Kalimantan
- ICA formed in March 2007
- Updating BFS, EPC selection and financing
SGA Bintan Project Smelter Grade Alumina Bintan Island, Riau 400,000 – 600,000 tpa Not Feasible Terminated
SGA Mempawah Project Smelter Grade Alumina Mempawah, West Kalimantan - JVA negotiations, Feasibility studies SGA Munggu Pasir Project
- Agreement signed in September 2007 – Smelter Grade Alumina Munggu Pasir, West Kalimantan
- JVA negotiations, Feasibility studies Mandiodo NCPI Project Phase 1: NCPI Mandiodo, Southeast Sulawesi
- JVA negotiations, Feasibility studies Phase 2: Stainless Steel Obi NCPI Project Phase 1: NCPI Obi Island, North Maluku
- Agreement signed in October 2007 Phase 2: Stainless Steel
Contained in Pig Iron - JVA negotiations, Feasibility studies Krakatau Iron Project Sponge Iron South Kalimantan
- JVA negotiations, Feasibility studies Pearl Nickel Project 1) Ferronickel Halmahera Island, North Maluku 1) 30,000 tpa - 50,000 tpa of FeNi - Agreement signed in February 2007 2) Nickel Cobalt
- JVA negotiations, Feasibility studies 2) BFS by 2012
- Note: this table is for illustrative purposes only as the feasibility studies are still being conducted for many of these projects and as such many aspects were not final
- NCPI = Nickel Contained in Pig Iron • EPC = Engineering Procurement and Construction • BFS = Bankable Feasibility Study • JVA = Joint Venture Agreement • TPA = Tons per annum
With large cash reserves following a recent expansion of our nickel volumes and thanks to a strong nickel price, we are ready to make new investments for our next phase of growth. With average annual nickel prices likely softening in the next couple of years and with little production growth if any in 2008, we feel it is imperative for our shareholders to also look carefully at our growth in the next three to five years.