Mining companies poised to reap profits

Mining companies poised to reap profits

JAKARTA (JP): Mining company shares remain attractive for
investment despite gloomy prospects in other business sectors,
say analysts.

Bahana Securities said in its latest research report released
early this week that mining firms such as tin producer PT Tambang
Timah and gold and nickel producer PT Aneka Tambang remained
healthy despite the country's economic crisis.

The mining companies are relatively immune to the country's
monetary crisis as most of their products are exported, according
to the securities company.

The rupiah's fall in value by about 75 percent against the
U.S. dollar since last July will make mining firms' earnings in
rupiah terms much higher than initial projections for the next
two years, Bahana said.

The securities firm estimated that PT Aneka Tambang's net
profit would total US$52.1 million in 1998 and about $56 million
in 1999, much higher than its profits of $22.5 million last year
and $13 million in 1996.

"We base our calculations in dollar terms rather than in
rupiah because the rupiah is still volatile," Bahana senior
mining analyst David Rubin told The Jakarta Post yesterday.

Bahana Securities said Tambang Timah was expected to post a
net profit of $112.5 million in 1998 and $125.9 million in 1999.

The company's net profit rose to Rp 170 billion ($18.8
million) in 1997 from Rp 156.6 billion in 1996.

Tambang Timah president Erry R. Hardjapamekas said the
company's high net profit could mainly be attributed to an
efficiency program and the rupiah's sharp depreciation against
the dollar.

Given such high profit records, foreign investors are expected
to remain upbeat on the mining sector since mining firms do not
have foreign exchange debts that would create financial hardships
during the monetary crisis, the report said.

"Both Tambang Timah and Aneka Tambang have no foreign exchange
debts," Rubin said.

He said, however, that macroeconomic conditions, such as the
country's high political and social risk associated with mounting
international pressure to implement IMF-backed economic reforms,
would temporarily hinder foreign investors from entering the
market.

Possible unrest would not adversely influence the operations
of the two mining companies in the long term as they are located
in remote areas, he said. He pointed out that Tambang Timah has a
plant on Bangka island near Sumatra, while Aneka Tambang has a
plant on Gag island in Sulawesi and another facility in Pongkor,
West Java.

The securities company said Aneka Tambang would also benefit
from an estimated fall in gold mining costs from $172 per ounce
in the first semester of 1997 to $100 per ounce in 1998.

A new contract of work awarded to PT Aneka Tambang and
Australia's mining giant BHP to jointly mine nickel on Gag island
will also give the company a more promising outlook, Rubin said.

"The bottom line is that mining companies will remain
attractive since they are operating with high efficiency and are
not affected by the rupiah's depreciation against the U.S.
dollar," he said.

He said Tambang Timah, which is listed in the London stock
exchange, would benefit from promising results from its
exploration in Aceh for copper and gold in a joint venture with
Phelps Dodge.

Tambang Timah has a 25 percent stake in the joint venture, he
said. (aly)