Seeing the mines for the trees – a dodgy Indonesian deal « Mining Blog

Seeing the mines for the trees – a dodgy Indonesian deal

11. July 2012,

A link between mining and timber extraction, especially in tropical countries, is not hard to detect: trees are felled and miners use the recently-ploughed roads to bring in exploration drilling equipment and take over territory that’s already been cleared of forests (and sometimes people).

However, it’s unusual to find such a close – if not internecine – relationship between a mining outfit and a pulp and paper group, as that forged in Indonesia in July 2012.

It’s quite a complex one, too – involving three Indonesian companies, a Singapore-listed timber enterprise, and an Indian-based infrastructure venture.

Golden Energy Mines is an Indonesian outfit, operating three thermal-coal mines with a combined resource of 1,930 metric tonnes of the black stuff. It sold just under 6 million tonnes of coal last year, reaping US$326 million in revenues.

Now, it has agreed to be taken over by United Fiber Systems (UFB), a timber produer listed on the Singapore Stock Exchange, which is prepared to pay out US$1.8 billion for the privilege.

In turn, UFB will receive a 97% stake in Golden Energy, funded by issuing US$1.8 billion worth of shares to another Indonesian energy company, PT Dian Swastatika Sentosa, which will take 67% of Golden Energy.

Dian Swastatika is itself a subsidiary of PT Sinar Mas Tunggal – which will end up with 65% of UFS (and then be obliged to make an offer for the remaining UFS stock).

The other 30% of Golden Energy is to go to the India’s GMR infrastructure group, which has “multiple” objectives with the deal, As stated by GMR’s finance director, gthese are:”listing in Singapore, better investor profile and a better re-rating for the stock…Singapore has a higher investor presence, valuations are better, and liquidity is higher”.

But whether, after these transactions are completed, Indonesia’s forests and those dependent on them, will be any better off, is open to considerable doubt [MJ 6 July 2012].]


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