It is reported that as an option to finance capex, Newmont is choosing to sell its share to the general public, where this plan will be proposed in the company’s EGM today. Initial news stated that Newmont aims for US$800.0mn of cash from banks, investors or other third parties for its capital expenditure, which will be secured by all or a majority of its assets. The company plans to sell 1.13bn of new shares (10%) in this IPO.
The EGM will also discuss the sale for as much as 880 million shares from PT Pukuafu Indah, one of the shareholders, during the IPO.
Newmont Nusa Tenggara is owned by Nusa Tenggara Partnership (56%), Indonesia Marbaga Investama (2%) Pukuafu Indah Enterprises (18%) and Multi Daerah Bersaing (24%). The latter is owned by Bumi Resources (75%).
A high IPO price for Newmont will help the value of Bumi’s ownership in Newmont, as the latter company has acquired 24.0% ownership with total cost of US$867mn. We also see that Newmont’s IPO may lower attractiveness of Bumi Resources Mineral, but it will provide clearer valuation for BRM as it owns 24% of Newmont. This would enable BRM to utilize the ownership, to obtain financing for development of its projects, such as Herald.
Separately, Bumi’s share price has freefell by 17.3% to Rp1,430 yesterday from Rp1,730 early this month, sparked by news reporting that China’s domestic thermal coal supply outstripped its demand, due to shrinking power consumption in energy-intensive heavy industries and an increase in hydropower generation. The news dragged down coal price (Newcastle) to the lowest level this year at US$88.5/ton last week or 17.9% lower from its highest level this year at US$107.9/ton in May 2010.
The news conveyed negative sentiment for Bumi Resources as lower coal price may affect Bumi’s ASP target for 2010F at US$67/ton, despite strong operational data in 1H10.
Nevertheless, recent hefty correction provide attractive valuation as Bumi is currently trading at 2011F PER of 9.3x and EV/EBITDA of 4.7x, Buy.
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