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Indika’s strategic investment in Nusantara’s gold pursuits

Published 08-FEB-2019 14:39 P.M.


4 minute read

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Leading Indonesian-listed integrated energy company, PT Indika Energy Tbk (IDX: INDY), has identified gold as a strategic sector and is upping its exposure to the safe harbour metal.

With strategic investments in energy resources, energy services, and energy infrastructure across the coal and oil and gas sectors, the company has recognised a strategic opportunity to get involved in the precious metals space.

Indika subsidiary, PT Indika Minerals Investindo, recently acquired 19.9% holding in ASX-listed Nusantara Resources (ASX:NUS) – a pivotal step in Indika’s diversification strategy into other mining sectors. This investment in Nusantara provides confidence that there is investor and funding support for the development of this large gold project.

Nusantara's 100% owned Awak Mas Gold Project is located in South Sulawesi, Indonesia, and comes with all approvals in place for development.

One of the big attractions of Awak Mas is that it’s one of just a few undeveloped gold projects in the Asia-Pacific region, has an ore Reserve of 1.1 million ounces, within a 2.0 million-ounce Mineral Resource, and all approvals in place for construction.

A Definitive Feasibility Study (DFS) completed in October last year confirmed the project as technically feasible and financially robust, with significant opportunities to increase project value through optimising the current mineral resources and through further exploration.

The DFS supports an initial eleven-year project with the 2.5 Mtpa processing plant targeting annual gold production of around 100,000 ounces, delivering strong margins.

The mining operation will include two open pit mines with an initial 11-year life, and a low project strip ratio of 3.5.

As confirmed by high-grade results from near mine exploration, the Awak Mas deposit is at the centre of a goldfield that hosts a number of significant mineralised zones.

Results include wide zones of 28 metres at 1.2 grams per tonne gold and 37 metres at 2.3 grams per tonne gold, as well as a narrower high-grade width of 11 metres at 2.6 grams per tonne gold.

These exploration results further demonstrate the potential of the Awak Mas Gold Project to grow organically and provide potentially high-grade satellite operations to augment production from the existing deposits.

Backed by a bullish gold outlook Indika stepped up as Nusantara’s cornerstone investor last December, as the company completed a A$10.25 million capital raising. Indika acquired 30.6 million NUS shares at 23 cents per share — an almost 50% premium to the share price prior to the capital raising, which speaks to the confidence Indika has in the Awak Mas Project.

The pair entered into agreements defining an ongoing strategic relationship, which will focus on exploring avenues for completing the financing and development of the Awak Mas Gold Project.

NUS Managing Director, Mike Spreadborough, commented on the partnership with Indika:

“Indika’s investment in Nusantara is a significant milestone in progressing the project and demonstrates the value of this low cost, long life gold project and its exceptional exploration potential.

“Indika brings a wealth of Indonesian operation experience through its extensive resource and energy activities across Indonesia, and we look forward to the ongoing support and advice of Indika’s highly credentialed Board of Commissioners and Board of Directors.

Indika Managing Director and CEO, Azis Armand, shared similar sentiments:

“We are excited to be part of Nusantara Resources and as a local partner, we look forward to working together with management to unlock the potential of the Awak Mas Gold Project.

“We have identified gold as a strategic sector and are privileged to enter into this partnership as the project gets closer to its construction and production stage. This investment is an important first step towards our diversification strategy into other mining sectors.”

In another sign of confidence, leading Australian superannuation fund, AustralianSuper, simultaneously raised its shareholding in NUS to 14%. Nusantara's major shareholder, Lion Selection Group (ASX:LSX), holding 32.32% fully supports the placements to Indika and AustralianSuper.

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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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