BASML Aneka Tambang Tbk - Largely nickel

Still no sign of recovery; nickel price forecasts cut again On 5 March, our commodity team cut its nickel price forecasts 9.3% to US$4.3/lb in 2009, 8.5% to US$5.0/lb in 2010, 19.2% to US$4.85/lb in 2011, and 31.7% to US$4.95/lb long term. With stainless steel capacity still being aggressively cut and metal flowing steadily into the warehouse (up 60% in the last three months), the team estimates the nickel market will be oversupplied by 17,000-20,000t in 2009-10, and remain in surplus over the long term. It expects the supply side to cut production even further. We see nickel as the weakest base-metal performer.

Lower earnings estimates; cut PO 6% to Rp850 We cut our ANTM net profit forecasts 17% for 2009 and 20% for 2010. We lower our NPV-derived PO 6% to Rp850. Nickel comprises 67% of ANTM’s total revenue in 2008. 28% of revenue not reflective of gold contribution While we are bullish on gold (the team upped gold price forecasts 11% in 2009 and 2010 to US$1,000/oz and US$1,050/oz, respectively), we find ANTM’s gold
operations too small to offset its nickel business. Gold contributed 28% of ANTM’s
total revenue in 2008, but roughly 70% came from low-margin third-party gold trading business. Meanwhile, its existing gold mine reserve is fast depleting,which we estimate can last for another 3-4 years based on historical peak output.

4Q08 results prove ANTM still nickel company by and large ANTM reported losses at the GP, EBIT, and net profit levels in 4Q08. GP was down 113% YoY, 162% QoQ, to -US$215mn. EBIT was down 126% YoY, 759% QoQ, to -US$438mn. NP was down 124% YoY, 296% QoQ, to -US$311mn. This was while gold sales volume (including trading) was up 165% YoY, 34% QoQ, and price was up 26% YoY, 10% QoQ. Indeed, the nickel price was down 52% YoY, 43% QoQ, to US$4.9/lb, below ANTM’s cash cost of US$6.7/lb.