Below are the main points arising from the yesterday’s analyst
meeting :
The company is undergoing due diligence on two green-field coal mines located in Central Kalimantan, nearby its Tuah Turangga Agung concession area. One of the mines has about 10-15mn of coal reserves.
TTA is set to undergo trial production this year in preparation for commercial production by 1Q10 of 500k to 1mn tons. Its higher grade coal of 6,300/kcal is to be sold to Japanese power plants via a Japanese trading firm. TTA optimum capacity is about 3mn/pa upon full development.
Proposed mining law; initial take= business as usual. UNTR elaborated a bit on the current regulatory developments relating to mining contractor business. 3 main points were discussed namely (a) scope of work of mining contractor to be limited to overburden removal and coal extraction; which the company believes has gray areas given a section of the law stated no restriction of such. (b) restriction of affiliated co’s to conduct business; which defines affiliate as having direct/immediate relationship in UNTR case, Pama is not directly related to TTA and (c) foreign participation; which would allow foreign mining contractors to enter the Indonesian market, should local players lack capacity and resources to serve demand, which currently is being dutifully met by local mining contractors. Likewise, given the 3 year transition period to get this law into full effect, anything can change within that period.
We maintain buy on UNTR, currently trading at PER09-10F of 14.7x and 12.8x, respectively.
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