Mining for a pot of gold

PT Antam to appoint a financial advisor this week to decide if it should acquire a minority stake in Freeport Indonesia.

State-owned mining company PT Aneka Tambang (Antam) says it plans this week to appoint an independent financial advisor to help it conduct due diligence into the potential acquisition of a minority stake in PT Freeport Indonesia.

Antam is considering acquiring the government's 9.36% stake in the US copper and gold mining company Freeport Indonesia, which some analysts say is valued at $700 million.

The value is one of the key points an advisor is expected to clarify for the company. The advisor would also recommend whether to make an investment and how best to fund it.

Antam will choose its financial adviser this week from a short list of five investment banks: HSBC Securities, CLSA, Citigroup, BNP Paribas and Macquarie.

Following the due diligence and Antam's decision to proceed with the potential investment, a financial arranger, separate from the financial advisor, will be appointed.

A rights issue is one of the alternatives which may be considered.

As Antam carefully noted in a press release, "Although still at a very preliminary stage and pending minority shareholder approval, there is a possibility the acquisition would be effected through a cashless transaction, wherein the government would transfer its shares of PT Freeport Indonesia to Antam in exchange for newly issued Antam shares."

Antam says any potential share transfer would depend on the government's approval and a business evaluation - with the help of the newly appointed financial adviser - that demonstrates the transaction gives value to shareholders, including minority shareholders.

Freeport Indonesia, which owns and operates large copper and gold mines in Papua, the archipelago nation's easternmost province, is 81.28% directly owned by Freeport McMoran Copper & Gold Corp.; 9.36% indirectly owned by Freeport McMoran through its 100% ownership of Indocopper Investama; and 9.36% owned by the government.

Meanwhile, Antam's FeNi III ferronickel smelter construction is proceeding on time and on budget, says the company. Following the construction, Antam's EPC contractor is expected to switch on the smelter at the beginning of November and after a three month commissioning, commercial operations are expected to being in the first quarter of 2006.

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