Mining Issuers Reap Benefits from Downstreaming Programme, Check Stock Recommendations

The downstreaming programme is considered one of the main catalysts for mining issuers because it provides opportunities for increased value addition compared to merely selling raw materials. One of the issuers aggressively pursuing downstreaming is PT Aneka Tambang Tbk (ANTM). The company is currently involved in developing the Smelter Grade Alumina Refinery (SGAR) project in Mempawah together with Inalum through PT Borneo Alumina Indonesia (BAI). The first phase of the SGAR project has commenced operations and is targeted to produce around 1 million tonnes of alumina by 2026. Additionally, in the second half of this year, several other issuers are starting their smelters. Among them are PT Alamtri Minerals Indonesia Tbk (ADMR) and PT Cita Mineral Investindo Tbk (CITA), which are working on the construction of an aluminium smelter project in North Kalimantan. Equity Research Analyst at Phintraco Sekuritas, Alrich Paskalis Tambolang, stated that the prospects for mining issuers involved in downstreaming remain quite positive, as downstreaming provides opportunities for product value addition, revenue diversification, and improved margins compared to just selling raw materials. For issuers like ANTM, ADMR, and CITA, the success of smelter projects will strengthen the companies’ positions in the national mineral industry supply chain while reducing dependence on commodity price fluctuations. However, the benefits of downstreaming are generally not felt instantly because smelter projects require large investments and a relatively long construction period before they can fully contribute to company profits. On the other hand, investors also need to pay attention to several challenges, such as high capital expenditure requirements, potential project completion delays, global commodity price fluctuations, and demand risks from export destination countries. Therefore, the success of project execution is the main factor that will determine the magnitude of downstreaming’s contribution to the issuers’ performance. Analyst and Branch Manager of Panin Sekuritas Pondok Indah, Elandry Pratama, added that the operation of several strategic projects like SGAR and the progress of aluminium smelter construction make the long-term prospects for issuers such as ANTM, ADMR, and CITA still quite attractive. Thus, the market will focus more on project completion progress, operational efficiency, and potential margin improvements in the coming years. For the remainder of this year, the downstreaming programme has the potential to become a positive sentiment because it demonstrates the government’s commitment to increasing the added value of the national mining industry and opens up long-term revenue growth opportunities.