2006 was a trial year for new smelter.
In 2007 we deliver
Industry-beating margins and returns
to continue
Vast reserves of nickel and bauxite
which are increasing
Exposure to nickel, which has
arguably the best outlook of the base
metals
Experienced management and
well-governed company
1
2
3
4
6
7
8
9
10
Lower ferronickel cash costs in
future following conversion to less
expensive fuel
Exciting project pipeline in lower
cost-nickel and alumina
Big dividends, lots of cash, and
strong financial position to make
investments
Good shareholder returns
Sustainable long term growth
in harmony with the local
Antam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
www.antam.com
Contents
Antam In a Nutshell
From Us to You
Running Antam
Management Report
Owning Antam
Governing Antam
CSR Report
Auditing Antam
Contact Us
10 Year Financial Highlights 4
Our Mission and Vision 6
Antam Described 7
How We Did 8
How We Compare 9
Achieving Shareholder Returns 10
Event Highlights 006 11
Our Strategy 1
Our Exciting Projects 1
Our Reserves 14
Sustainable Growth 15
Our Main Income Earner: Nickel 16
Our Risks and Challenges 17
Our Awards and Certifications 18
007: Year to Date and Beyond 19
Where We Operate 0
Our New Corporate Logo
Letter from the Board of Commissioners 4 Letter from the Board of Directors 8
Board of Commissioners 4
Board of Directors 6
Q & A with the Board of Directors 8
Human Resources Management 40
Q & A with Perpantam (Labor Union) 4
Corporate Overview 44
Company Objectives and Strategy 45
Exploitation Licences 46
Main Operation & Product Mix 46
Customers and Markets 50
Business Dynamics 50
How We Manage Risk 5
Risk Statement 5
Review of Operations 54
Production, Sales, Revenue, Prices 55
Production, Sales, Costs and Selling Prices Tables 56
Cash Costs 57
Cost of Sales 58
Cost Reduction Program 59
Business Interruption – FeNi III 60
A Chronology of FeNi III 61
Financial Review - Abridged Financial Statements 6
Financial Returns 6
Assets 6
Liabilities 65
Long Term Debt 65
Free Cash Flow 66
Hedging Activities 67
Why We Repaid the Bond 68
Exploration and Reserves 69
Proved & Probable Reserves Table 70
Nickel Reserves and Resources Table 71
Gold Reserves and Resources Table 7
Bauxite Reserves and Resources Table 7 Exploring Initiatives for Future Growth 75
Strategic Development Projects 76
Acquisitions 78
Capital Expenditure 78
Active Joint Venture Table 80
Understanding Nickel 8
Shareholders Information 84
Dividend Policy 87
Investor Relations 88
Q & A with our Largest Shareholder 90
Attestation Statement of Governance Practices 9
Statement on the Status of Corporate
Governance Practices 94
Code of Conduct 104
Internal Audit 105
Board Committees Reports 106
Community Involvement 114
Key Personnel and Business Units 164
Institutions and Supporting Professionals 165
Statements of Approval for Annual Report 166
Corporate Identity 168
Engaging Our Stakeholders 11
Protecting the Environment 11
Consolidated Financial Statements 118
Notes to Consolidated Financial Statements 1
Responsibility for Financial Statements 116
4
006 ANTAM Annual Report www.antam.com10 Year Financial Highlights
* Annual Average of daily spot price
Net Sales 58.56 449.55 1,01.91 966.15 1,566.15 1,75. 1.711.40 ,18.81 ,858.54 ,51.4 5,69.40 7
Cost of Sales 4.0 5.8 450.75 547.7 860.8 1,1.9 1,80.48 1,471.91 1,497.70 1,87.14 ,887.94 58
Gross Profit 14.54 197.7 571.16 418.4 706.0 61.9 40.9 666.90 1,60.8 1,44.10 ,741.47 9
Earnings Before Interest, Tax,
Depreciation and Amortization 1.4 149.4 86.54 9.47 661.6 6.81 64.96 466.18 1,17.77 1,94.60 ,778.4 99
Income from Operations 87.8 146.17 475. 18.0 57.8 16.9 47.4 447.98 1,096.57 1,099.77 ,40.69 119
Interest Expense 50.54 0.9 54.56 9.04 5.4 19.00 1.0 16.7 .0 5.56 141.96 455
Net Income .6 60.40 99.6 4.4 8.16 118.91 177.40 6.55 810.5 841.94 1,55.78 84
Outstanding Shares (‘000) 100 1,0,769 1,0,769 1,0,769 1,0,769 1,0,769 1,907,69 1,907,69 1,907,69 1,907,69 1,907,69 0
Net Income per Share (Rp) - 49.07 4. 190.40 11.1 96.61 9.99 118.76 44.7 441.4 81.96 84
Dividend per Share (Rp) - .59 10.87 7.19 155.66 48.1 4.4 8.60 148.08 150.05 -
-Total Assets 7.4 1,600.79 1,976.84 ,055.5 ,516.4 ,577. ,55.0 4,6.85 6,04.64 6,40.71 7,90.91 14
Total Liabilities 418.4 47.86 589.85 598.01 757.00 890.6 84.86 ,54. ,600.18 ,7.07 ,009.0 (11)
Total Long Term Debt 06.95 44.44 67.0 51.61 6.88 171.86 80.90 1,664.64 ,07.45 ,59.66 1,89.78 (9)
Total Stockholder’s Equity 04.8 1,1.5 1,76.5 1,447.65 1,750.1 1,680.48 1,675.48 1,78.51 ,44.47 ,09.64 4,81.60 41
Net Working Capital 0.08 451.990 47.1 45.50 76.04 874.0 87.99 ,100.1 ,064.9 1,08.11 ,18.09 6
Return on Investment 1.7% 10.96% .51% 19.94% 7.10% 5.70% 9.55% 11.17% 1.70% .% 45.41% 40
Return on Equity 11.08% 8.46% .95% 16.60% .96% 6.9% 10.57% 1.10% 8.5% 0.77% 4.48% 8
Return on Assets 4.7% 5.0% 16.7% 11.6% 16.76% 4.67% 6.95% 6.61% 15.6% 1.5% .68% 68
Current Ratio 100.07% 78.09% 98.58% 54.96% 5.9% 9.69% 9.09% 568.0% 6.% 67.8% 81.7% 5
Total Liabilities to Equity 17.7% 4.19% 4.86% 41.1% 4.5% 5.00% 50.7% 14.60% 147.40% 111.4% 70.8% (7)
Total Liabilities to Assets 61.4% .6% 0.17% 9.10% 0.08% 4.56% .4% 58.78% 59.58% 5.68% 41.47% ()
Gross Margin 4.7% 4.88% 55.89% 4.1% 45.08% 5.9% 5.18% 1.18% 47.61% 4.80% 48.70% 11
Operating Margin 4.49% .51% 46.51% .9% 4.0% 7.8% 14.46% 0.95% 8.6% .8% 4.70% 6
Net Margin 9.10% 1.4% 9.9% 4.6% 4.46% 6.85% 10.7% 10.59% 8.4% 5.90% 7.58% 7
Operating Cashflow 58.08 118.04 59.65 18.86 85.48 85.51 50.16 481.18 764.00 74.4 1,690. 18
Capital Expenditure 6.10 189.49 98.61 14.57 98.8 90.11 10.0 65.99 1,64.6 1,11.0 (47.6) (104)
Free Cashflow (4.0) (71.45) 141.04 76.9 76.66 95.41 146.86 (154.80) (600.6) (568.69) 1,77.68 44
Exchange Rate (Rp/US$)* ,7 ,890 10,4 7,848 8,405 10,56 9,16 8,570 8,95 9,71 9,167 (6)
Gold Price (US$/t.oz)* 87.81 1.10 94.6 78.87 79.18 71.5 10.57 64.06 409.87 446.14 604.65 6
Nickel Price (US$/Lb)* .40 .14 .09 .74 .9 .71 .08 4.7 6.7 6.45 10.96 70 Billion Rupiah
4
006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
“Consistent
income growth”
Description 1996 1997 1998 1999 000 001 00 00 004 005 006 006/005
Earnings Before Interest, Tax,
Depreciation and Amortization
(Billion Rupiah),778
1,95 1,18
466
0 04 05 06
65
0
Debt to Equity
(%)
1
64 85 97
0 04 05 06
16
0
Operating Cash Flow
(Billion Rupiah)1,690
74 769
481
0 04 05 06
50
0
Return on Equity
(%)
4
1 8
1
0 04 05 06
11
0
Revenue per Segment
(Billion Rupiah) 05 04 0 0 589 190 56 166 1,47 554 11 1,07 48 156 066
006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Vision 2010
Mission
To be a mining company of
international standards with a
competitive advantage in the
global market
• To provide high quality products
of nickel, gold and industrial
minerals with the utmost concern
for work safety and health as well as
environmental conservation
• To operate in the most efficient
manner (low cost operations)
• To maximize shareholder and
stakeholder value
• To enhance employees’ welfare
• To participate in efforts to improve
the social welfare of communities in
the vicinity of the mining areas
Pomalaa engineers inspect the rotary kilnof FeNi III
What it All Boils Down to: Our Mission and Vision
Based on Antam’s vision 010, Antam aspires to become a much bigger and better mining company. A mining company that is larger, more pro-active, more productive, more future-oriented, more profitable, better balanced and more competitive on the international market.
The mission of Antam, in a nutshell, is to meet all its commitments and obligations to its various stakeholders: to shareholders through sustainable and consistent earning growth by operating in the most efficient manner; to employees through enhancing their welfare by ensuring a healthy, safe and rewarding work environment; to customers by providing high quality products; to the public and the society by participating in efforts to improve the welfare of surrounding communities and conserving the environment in the mining area.
Antam is an Indonesian state-owned mining and metals company that has been discovering, excavating, processing, refining and marketing to around the world since 1968. Earning largely US dollars, Antam sells nickel ore to Japan and China and processes nickel ore into ferronickel for sale to European and North Asian stainless steel companies. Antam also sells gold and the by-product of the gold refining, silver, to jewelers in Indonesia and abroad. Antam’s bauxite, the raw material for alumina is sold to Japan and China. Antam runs Indonesia’s only precious metals refinery.
Antam is a diversified company in terms of assets, culture and long term outlook, but a nickel company at least until the end of the decade. While retaining its vertical integration, Antam is moving downstream to become a metals processing company. The company’s strengths include its low cost of operations, although ferronickel cash costs are high at the moment due to expensive fuel, and its large reserves and resources.
Antam is 5% held by the public, the majority of which is by foreign institutions, who have held Antam for a number of years. Listed on the Jakarta and Australian Stock Exchanges, Antam is known for its relatively high levels of transparency and governance. Antam also has good employee relations and long term, loyal and satisfied customers.
Ferronickel 49% Nickel Ore 5% Gold 11% Bauxite 4% Silver 1% Others 1%
Diverse Product Mix
Export Oriented
Ferronickel Saprolite Bauxite Gold Limonite
• Europe • Korea • Japan • Taiwan • India • China
• Singapore • Indonesia • Japan
• Eastern Europe
• Japan • China
• Australia • China
Rp2,725 billion
Rp601 billion Rp268 billion
Rp190 billion
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006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
The main reason for Antam’s superior performance in 006 comes down
to one thing: nickel. Antam enjoyed record-breaking profits in 006 on the
back of higher nickel prices and increased nickel volumes. Thanks to the
completion of the three year construction and ramp up of Antam’s third
ferronickel smelter, Antam more than doubled its nickel capacity. Antam
doubled nickel sales and volumes and was one of the few companies to
bring new nickel to a market with significant supply constraints that can’t
match the growth of global demand, in particular that of China.
How We Did: Achieving Growth
Antam in a NutshellProduction and Sales
Unit
005
006
006/005 (%)
Production Volume
Ferronickel metric ton Ni 7,8 14,474 97
Saprolite Nickel Ore wmt ,408,5 ,49,961
Gold kg ,911 ,87 (1)
t.oz 9,589 9,67 (1)
Sales Volume
Ferronickel metric ton Ni 6,988 1,89 9
Saprolite Nickel Ore wmt ,05,841 ,75,466 1
Gold kg ,69 ,40 (8)
t.oz 116,994 107,81 (8)
Cash Cost, Production Cost and Average Selling Price
Unit
005
006
006/005 (%)
Cash Cost
Ferronickel US$/lb .91 4.40 1
Saprolite Nickel Ore US$/wmt 14.80 0.15 6
Gold US$/t.oz 5.94 8.9 1
Production Cost
Ferronickel US$/lb 4.0 6.00 40
Saprolite Nickel Ore US$/wmt 19.77 0.
Gold US$/t.oz 6.5 75.6 1
Average Selling Price
Ferronickel US$/lb 6.45 10.1 57
Saprolite Nickel Ore US$/wmt 44.64 55.6 4
Despite doubling nickel volumes, we were still short of our expectations as FeNi III experienced some delays while the contractor ramped up the unit to commercial operations - perfectly normal in the metals business, but unfortunate. We were not bailed out by prices, however, as we can see that our performance was as good and sometimes better than other beneficiaries of high commodity prices. In 007, we’re in control of FeNi III and will deliver another industry-beating performance.
“Antam’s
performance
has been on
par and often
better than other
beneficiaries of
high commodity
prices”
Key Ratios
Top 40 Global Companies
Indonesian Mining Companies
Antam
004 005 004 005 004 005 006
Ebitda Margin 0% 6% 9% 4% 46% 41% 49%
Net Profit Margin 15% 0% 19% 4% 8% 6% 8%
Return on Equity * 19% 5% 7% 9% 8% 1% 4%
Debt to Equity 5% 6% 4% 51% % 40% 1%
Key Ratios
Australian Miners Indonesian
Miners Antam
Average 10 years (1996-005)
Average 10 years (1996-005)
Average 10 years (1996-005)
Ebitda Margin NA 8% %
Net Profit Margin 1% 15% 18%
Return on Equity * 9% 17% 18%
Debt to Equity 7% 17% 51%
Revenues and Profits Highlight
Operating Income COGS
Sales
00 00 004 005 006
500 1,000 1,500 ,000 ,500 ,000 ,500
5,69 (7%)
,888 (58%)
,404 (119%)
R
p Billion
4,000 4,500 5,000 5,500
Source: PricewaterhouseCoopers, Antam
* Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period.
Source: PricewaterhouseCoopers, Antam
* Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period.
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006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Achieving Shareholder Returns
Our share price increased significantly in 006 and outperformed the Jakarta Stock Exchange composite index by 49% and the mining index by 50%. We also outperformed the major indices and mining indices from around the world. This is not an isolated occurrence however as over the past five years we have outperformed the JSX every year by an average of 9%. Over the past five years we have outperformed the major indices and mining indices ranging from 4% to 04%. We have achieved significant shareholder returns over the past few years and hope we can continue to deliver value to our shareholders.
Antam in a Nutshell
005 006 %
Earning per Share 441.4 81.96 84
Dividend Per Share (Rp) 150.05 -
-Average Price Earning Ratio 5.6 1.00 11.5
Ratio Summary ,000 1,600 1,00 800 400 0
January June December
Share price performance vs Jakarta Composite Index in 006
VS. Mining Companies
PT Timah -6
PT Inco -7
Inco Ltd
Falconbridge 4
BHP-B Ltd 108
Rio Tinto Plc 16
AngloAmerican 86
Harmony 41
Barrick Gold 110
Newcrest 117
Alumina Ltd 171
Freeport 80
VS. Index
LQ45 54
JSE Composite 49
JSE Mining Index 50
ASX All Ordinaries 67
Dow Jones 99
TS Composite 101
NASDAQ 11
Hang Seng 54
S&P 500 104
DAX 87
FTSE 80
FTSE All Share Mine 55
Reports
Analysts Press Releases
ASX Fillings Bloomberg Articles Bloomberg Terminal “Entries” Buy 7 (54) Hold (4) Sell 17 (1)
0(1) 16(1) 4(54) 9(150) 541(645)
Shares in Issue 1,907,691,950
Market Capitalization Rp15.6 tn (US$1.69 billion)
Price Range Rp,55 – Rp8,450
Average Share Rp5,1
Trading Volume 1.41 billion
Average Daily Volume 5,8,795
Major Shareholder:
Government of Indonesia (65%)
Substantial Minority Shareholder: OppenheimerFunds, Inc. USA (8.81%)
Final Dividend Payment Date: July 7th, 006
Final Dividend Amount: Rp150.05 per share, AUD0.108999 per CDI Analyst and Media Coverage (005 in parenthesis)
Share price at the end of the period at ASX:
AUD.75/CDI
Share price at the end of the period at JSX:
Rp8,000
Antam’s shareprice performance compared to the following, in percentage:
Following the completion of a 8-month construction p e r i o d t h at b e g a n i n O c tober 00, Antam switched on FeNi III smelter which is located at Pomalaa, Southeast Sulawesi.
Antam announced it is optimizing the design and plan of the Pongkor, West Java, gold mine due to softer than expected wall characteristics in order to improve safety and the extraction rate at the mine.
Antam and partners signed Joint Venture Agreement for the Tayan Chemical Grade Alumina project. The joint venture agreement w a s s i g n e d i n To k y o by senior executives of Antam and its international partners, Showa Denko K.K. (SDK), of Japan, Straits Trading Amalgamated Resources Private Limited of Singapore (STAR), and Marubeni Corporation of Japan.
Antam sent a voluntary team and logistics to aid earthquake victims i n Yo g y a k a r t a a n d sur rounding areas in Central Java.
Antam was informed by the turnkey or EPC contractors that built Antam’s new FeNi III smelter that a leak from the metal tap hole of the smelter will require a shutdown for repairs.
2 June
5 July 10 August
12 February 17 March 31 March
• A n t a m a n n o u n c e d the launch of its new corporate signature (logo).
• A n t a m a n n o u n c e d that due to a higher t h a n e x p e c t e d withholding tax rate it will repay holders of the outstanding notes issued by Antam Finance Limited (AFL) in 00 on December 9, 006, earlier than planned.
6 December 20 December
Antam signed a Heads of Agreement with a Chinese company to build a Smelter Grade Alumina plant at B i n t a n , R i a u I s l a n d s , Indonesia.
1
006 ANTAM Annual Report www.antam.comAntam in a NutshellAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Our Strategy: Clear and Effective
Our strategy is clear and effective. We’re going to maximize shareholder value
by continuing to do what we do best, by creating and running sustainable
operations and maintaining a solid financial foundation. Our strategy starts
with our reserves, the most important part of a mining and metals company.
We have huge deposits of nickel and bauxite and moderate gold reserves.
Tayan Chemical Grade Alumina (CGA) (Antam 49%, option to increase) · Operation target of 010
· 00,000 tpa of CGA
· US$0 - US$50 million, 65% debt funded without recourse to sponsors · JV company, PT Indonesia Chemical Alumina, formed in February 007 · Next step: Bankable Feasibility Study to be updated
Bintan Smelter Grade Alumina (SGA) (Antam 51%) · Operation target of 010
· 400,000 tpa of SGA
· US$50 million, 65% debt funded without recourse to sponsors · In discussion with Chinese partners
· Next step: Bankable Feasibility Study, Joint Venture Agreement, Environmental Impact Analysis
Obi Iron Cap (Antam 51%) · Operation target of 010
· Nickel contained in pig iron or sponge iron for sale to steel companies · 65% debt funded
· HoA signed with Krakatau Steel and TransAsia (Russia) May 006 · Next step: Bankable Feasibility Study
FeNi IV (Antam 70%) · Operation target of 01
· 50,000 tpa of nickel contained in ferronickel · US$1 billion, 70% debt funded
· Alliance formed with BHP Billiton · Next step: Bankable Feasibility Study
Hydromet Nickel Project (Antam 0%) · Target of BFS by 010
· Product: nickel (plus cobalt) in an intermediary product
· Likely about 50,000 tpa. High capital costs. Low operational costs. · Alliance formed with BHP Billiton to jointly develop
· Next step: Bankable Feasibility Study
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006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Our Reserves: Big and Growing
At its most basic a mining company is only as strong as its reserves. One only need look at all of the merger and acquisition activities that have been going on in the mining world to recognize the value of reserves in this age of commodity scarcity. Antam’s vast, good quality reserves and resources, in particular nickel and bauxite, are a significant strength of the company and will provide many years of value in the years ahead. As gold reserves are depleting Antam is looking to acquire more. Antam has a total of 77 mining licenses covering over 1. million hectares in Indonesia, which provide significant potential to develop new mines and processing facilities. All of Antam’s reserves and resources estimations are JORC-compliant.
Antam in a Nutshell
Commodity
Ore Quantity Change Production
005 006 (%) 006
Saprolite Nickel 11,050 179,850 61 ,494
Limonite Nickel 175,450 185,150 6 860
Gold 4,550 ,86 (15) 78
Bauxite 85,400 84,400 (1) 1,50
Mineral Resources and Ore Reserves (‘000 wmt)*
Commodity
Ore Quantity
Change (%)
Estimated Rate of Annual Production
(‘000 Wmt) **
Estimated Remaining Years Without Further Exploration or Increased
Production/ Development **
005 006
Saprolite Nickel 0,100 6,900 11 ,500 18
Limonite Nickel 18,450 51,450 179 1,500 4
Gold ,0 ,88 (10) 400 7
Bauxite ,900 84,400 149 1,500 56
Proved and Probable Reserves (‘000 wmt)*
Surface exploration activities at Pomalaa
* Based on the Competent Person’s report. Figures as per December 1, 006 (Inferred resources were included in gold estimation). Please see detailed tables in the Exploration and Reserves section.
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006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Our Main Income Earner: Nickel
Our profits and growth will largely come from nickel till the end
of the decade. We are a diversified mining company in terms of
assets, reserves and future outlook, but a nickel company in terms
of income.
Nickel is a fascinating metal and dynamic 1.4 million tonnes per year market place. We believe it has the best outlook of the base metals as there is limited substitution for its role in making high quality 00 series stainless steel, which accounts for 75% of stainless steel consumption and itself has a low substitutability. Global demand for stainless steel tends to grow about 6% per year, but due to the strong demand from China, demand has surged. However, global industrial production is most influential, as China still only accounts for 18% of global consumption. On the supply side, producers can’t keep pace with demand growth so global inventories are at all time lows. The pipeline of projects has about 150,000 tonnes of new nickel coming to the market possibly by the end of the decade. Further delays are likely as they are low grade, high technology projects that are expensive to construct. As well, recent M&A activity is consolidating the supply of nickel into the hands of a few producers.
Antam in a Nutshell
00 004 005 006 007 008 009 010
1,000 1,100 1,00 1,00
Nickel Supply Cannot Match Demand
kT
Year Supply
Consumption
007 008 009 010 011 01 01 014 015 016 017 018
Current c/lb 1,688 1,679 1,50 800 580 510 540 540 650 610 650 750 LME Price (US c/lb)
Source: Brookhunt
Source: Brookhunt
• Nickel prices are volatile and will eventually begin falling, due to decreases in demand growth, especially from China, or a significant supply growth. While we have a diversity of customers and are not dependent upon China, this could have a major impact on our revenue growth.
• Our ferronickel cash costs are too high as we no longer use subsidized diesel. Fuel prices are now subject to international oil prices. The cash cost of ferronickel is about 50% fuel. If oil prices rise, our costs could increase significantly.
• Our challenge is to reduce our cash costs by converting to either natural gas, hydropower or coal.
• Our challenge is to invest our cash wisely to sustain growth.
• There is a risk if the draft mining law is passed it will curb our ore exports. We already planned to stop ore exports and move downstream and the ban will likely be introduced in stages without impacting our plans.
• Our challenge is to run our operations without disruptions and in harmony with local communities and the environment.
Antam’s Production Costs
005 (%)* 006 (%)*
Materials 1 19
Fuel 10 17
Services 0 16
Depreciation 9 14
Labor 15 1.5
Royalty 6 4
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006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Awards
Asia’s Best Companies 006 – FinanceAsia:
• Best Corporate Governance (10th)
• Best Investor Relations (8th)
• Best Commitment to Strong Dividends (6th)
005 LACP International Annual Report Award:
• 16th out of 1,900 participants from 16 countries
• Platinum winner in Materials category
• Gold winner in Report Cover category
Anugerah Business Review 006:
• Best Corporate Secretary
• Best SME partnership and community development program
• Best Financial, Share and Board of Commissioners Performance (nd)
• Best Corporation (rd)
Best listed company (nd), Investor Award 006
Best Website, Indonesia Sustainability Reporting Award 006
Best Corporate Governance Practices in Small/Mid Cap Category in Asia/Pacific, IR Global Rankings
Bronze medal for Safety category, Ministry of Energy and Mineral Resources ‘Piagam Pratama 006 ‘
Our Awards and Certifications
Antam in a Nutshell
YTD (April 007)
• Handover of FeNi III smelter from contractor. FeNi III running smoothly at 85% or 6MW • Nickel prices soar to new heights; profit margins widen considerably
• Cost of nickel ore from PT Inco increase in line with higher spot prices resulting in rise in ferronickel cash costs rather than decrease expected from economies of scale
• Alliance formed with BHP Billiton to develop FeNi IV and low grade nickel ore using new hydromet technology
• JV company for Tayan Chemical Grade Alumina project formed
• Exports of nickel ore begin to Chinese makers of pig iron containing nickel for stainless steel industry
...and Beyond:
• May 0th AGM to decide on 1:5 stock split
• Decision on which cheaper fuel to convert to: either natural gas, hydropower • Decision on potential acquisition of gold deposit or company in Indonesia or region
• Decision on which minority stakes to increase, in joint ventures with international mining companies throughout Indonesia in nickel, lead/zinc, diamonds and gold
0
006 ANTAM Annual Report www.antam.comAntam in a NutshellAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Where We Operate
A B D
E
F
1,00 Km
450 Km
23 7 6
4
5
INDONESIA
MALAYSIA
2
MARTABE (Gold Deposit Antam
Bid on in 006) 1
SENGKANG (Gas Field Owned by
Energy Equity Epic (Sengkang))
POMALAA TIMUR (PT Inco-owned property and Antam
source of 1 million wmt of nickel ore
per year) POSO LAKE
(Potential Hydro Power Plant)
SONORO (Gas field owned by
Medco)
BATU HIJAU (Newmont-owned mine
that Antam considered investing in)
1
7 8
11
12
8
Head Office
AssetsRp 1,78 billion
Sales N/A
Employees 1
Gold and Refining
Assets Rp688 billion
Sales Rp690 billion
Employees 769
Bauxite and Iron Sands
Assets Rp104 billion
Sales 05
Employees 8
Nickel and Refining
Assets Rp 4,716 billion Sales Rp 4,74 billion
C
9
GRASBERG (PT Freeport
Indonesia-owned mine that Antam considered investing in) 3 4 5 6 10 9
Operations (100% Antam)
Type Location
Bauxite Mine Kijang Gold Factory Cikotok Gold Mine Cikidang Iron Sands Mine Kutoarjo Iron Sands Mine Lumajang Precious Metal Refinery Jakarta Gold Mine and Factory Pongkor Nickel Mines And Smelters Pomalaa
Nickel Mines Tanjung Buli, Mornopo, Gee
1 2 3 4 5 6 7 8 9 Antam’s Projects 1 3 4 5 6
Strategic or Majority Stake Development Projects
Tayan Chemical Grade Alumina (CGA) Antam 49%
Bintan Smelter Grade Alumina (SGA) Antam 51%
Obi Iron Cap Antam 51%
FeNi IV Antam 70%
Hydromet Antam 0%
Minority Stake Joint Venture Projects
PT Nusa Halmahera Minerals* Antam 17.5%
PT Cibaliung Sumberdaya Antam 10.5%
PT Sorikmas Mining Antam 5%
PT Gag Nickel Antam 5 %
PT Weda Bay Nickel Antam 10%
PT Dairi Prima Minerals Antam 0%
PT Galuh Cempaka* Antam 0%
7 8 9 10 11 12 2
* currently operational
Antam’s Promising Exploration Areas
Prospect Location
Nickel Bahubulu, Tapunopaka, Mandiodo
Nickel Tangofa, Langkawe, Wosu
Nickel Buli, Gee
Gold G. Patah-Tiga
Gold Seblat
Gold Papandayan
A B C D E F
Note: Antam had other active exploration areas not Head Office and Geology Unit
Gold
Nickel
Iron Sands
Bauxite
representing the mother earth, or nature
Under the arc is a reflection o f t h e t h re e m o u n t a i n s, representing the mineral resources inside or underneath the earth
The two halves of the logo can also symbolize the two types of mine: open pit, and underground
This logo represents Antam, who know how to reach down into the earth, and bring up raw materials and process them into precious metals
The symmetrical shape of the logo, and the style of the logotype, especially the capital ‘T’ in the middle, conveys a sense of stability, strength, and solidity, even friendliness
The logo captures many of the brand attributes:
- Pillars: Mining, diversified, established, big
- R a t i o n a l a t t r i b u t e s : P r o f e s s i o n a l , p r u d e n t , responsible, trustworthy - Pe r s o n a l i t y a t t r i b u t e s :
Progressive, dynamic, open
The logo is composed of three mountains,
representing the mineral source of Antam’s
products. The ‘’ represents ‘diversified
sources, diversified products’
Our New Corporate Logo
The brand concept of ‘Three Mountains’
From Us to You
4
006 ANTAM Annual Report www.antam.com“In general, we are satisfied with
the performance of the Board
of Directors and the employees.”
4
006 ANTAM Annual Report www.antam.comIn 006, we, Antam’s Board of Commissioners performed the duties of supervising and advising the Board of Directors in managing the company. In performing our tasks, we made use of five established committees which are the Audit Committee, Risk Management Committee, Good Corporate Governance (GCG) Committee, Environment and Mine Closure Committee, and Nomination, Remuneration and Human Resources Development Committee.
In 006, we focused on the implementation and improvement of GCG practices, improvement of the performance of the internal audit function, implementation of enterprise risk management, organization restructuring, improvement of the human resources grand plan, and review of environment and mine closure planning.
We also closely watched the company’s significant events such as the completion of the commissioning of the FeNi III smelter, which occurred at the end of December 006. The existence of the smelter provided a significant boost to the company’s performance as the completion of the FeNi III project occurred during the high nickel price environment. Its production capacity exceeds the capacity of the existing smelters, FeNi I and FeNi II.
As a mining company which strives to add value to its reserves, we also actively urged the Board of Directors to realise the next growth projects such as the chemical grade alumina (CGA) project as mandated in the Annual General Meeting of Shareholders held on May 0, 006. This project will be another milestone for Antam and for the Kijang operation which has exported raw bauxite ore for the past 60 years.
We also expect the smelter grade alumina (SGA) project will soon follow, which will process bauxite into alumina, the raw material for aluminum.
We support the strategy to add value to the company’s vast nickel resources to support long term growth in a sustainable manner. We are in agreement with the Board of Directors to evaluate energy alternatives to reduce the cash cost of producing nickel.
To support these growth projects, we reminded management that a very crucial factor is the existence of competent human resources. By utilizing new technology and making new products, we will then find out the competency gap between existing human resources with those needed.
To fill such a gap, the company needs to prepare its human resources, by way of a well planned recruitment, internal and external training as well as learning activities. We believe that the Learning Centre must be put in a strategic position within the company’s organization structure. We also will continue to advise the management to continually develop the company’s human resources and improve the employees’ competencies as intangible assets through fast track and regular recruitment. The company must also have a comprehensive training program to build competent human resources with high work productivity. The current organization structure must be reviewed completely and include specific job descriptions to support the company’s growth plans. We paid close attention to management’s evaluation on the effectiveness of the current organization structure. The evaluation will help create a better suited and more efficient organization structure to meet future challenges.
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006 ANTAM Annual Report www.antam.com Inline with the improvement of good corporate governance practices, we are proud that the company received a best GCG implementation award in 006 from an independent institution, Investor Relations Global Ranking. In 006, the share price hit its highest ever of Rp8,000 at the end of December 006, much higher than the Rp90 IPO price.To follow up the 005 GCG assessment based on the Australian Stock Exchange (ASX) GCG Best Practice Guidelines conducted by Ernst and Young, which mentioned risk management as an area which needed focus, we suggested the formation of a risk management team. In 006, the Board of Commissioners via the Risk Management Committee worked closely with the management’s Risk Management Team to discuss work plans which will be implemented in the Head Office and Business Units. Despite mapping the company’s risks, we recommended the Risk Management Team focus on the company’s high-impact risks and develop efforts to mitigate the risks, including selecting individuals to take responsibility for these efforts.
In general, we are satisfied with the performance of the Board of Directors and the employees for achieving the targets and especially for attaining the highest net profit even though this result is mostly due to high nickel prices. Given the trend of increasing cash costs, we continue to remind the Board of Directors to continue to seek energy alternatives to power its ferronickel operations.
In 006, we also supported the early repayment of the remainder of the US$00 million Eurobonds that were still outstanding. The early repayment was due to the change of a tax treaty which increased the financial burden of the company.
As well, the Board of Commissioners also approved the increase of pension payments to improve the welfare of the pensioners even though this decision increased the company’s obligation to the pension fund by more than Rp100 billion.
To improve the performance and productivity of the employee, we reiterate that the key performance indicators and a performance-based management system must be implemented comprehensively. We also support the continuation of the work force reduction program to help increase productivity and reduce production costs.
The environment and mine closure program is part of Antam’s mining activities and we realise the company is fully responsible for this program inline with the law and regulations. From our observations, the company has performed well in terms of the environment and mine closure programs at the Gebe nickel mine, Cikotok gold mine and Cilacap iron sands mine, even though some improvements can be made.
Inline with the extension of the mine life at the Kijang bauxite mine and Cikotok gold mine, we suggest the management revise the mine closure plan so as to better match with the situation and conditions. With every mine closure program, there should also be job creation and local business development programs to ensure the continuation of the local economy.
On behalf of the Board of Commissioners
Ir. Wisnu Askari Marantika President Commissioner
We advise the management to speed up the development of vast low grade nickel resources so Antam can be at par with the development of other world nickel producers. This was mandated by the majority shareholder during the Annual General Meeting on May 0, 006. Such developments are evident in projects around the world that will implement new technology to process low grade nickel resources.
We would also like to express our appreciation to the continuous efforts from the management to increase productivity and build relationship with foreign investors despite the challenging environment in the mining industry.
8
006 ANTAM Annual Report www.antam.com“It was a landmark year as your
company entered a new level
and new playing field in terms of
market capitalization as well as
sales and profits.”
8
006 ANTAM Annual Report www.antam.comDear Shareholder,
The year 006 can be characterized as year of important achievements and exploration for your company. It was a milestone year as Antam completed a long period of expansion and entered a new growth phase. It was a trial year of the new ferronickel smelter, which was handed over to Antam and is now under our control. It was a productive year, as we still managed to double our ferronickel output and exceed our gold production target. It was a landmark year as your company entered a new level and new playing field in terms of market capitalization as well as sales and profits. With all these changes occurring, we felt it was time to refresh and to improve the look and brand of the company, so we created a new logo. It was a year that brought new opportunities and possibilities as the mining sector continued to boom and our cash flows and profits grew to unprecedented levels. It was an exciting year for the Board of Directors and everyone here at Antam as we improved our industry-beating net profit margin and return on equity. What a great time to be a mining and metals company. What a great time to be located in the mineral-rich archipelago of Indonesia where the mining industry is basically in its infancy, the returns are higher than elsewhere and with close proximity to the huge growing markets of China and India, which have great potential as new buyers, partners and investors. We are hungry like we never have been before as we explore all the exciting possibilities for the next phase of development. We will continue to implement our simple yet effective three-part strategy of continuing to do what we do best, which is discovering, mining, exporting and (increasingly) processing nickel, gold and bauxite from our vast Indonesian reserves, while maintaining a solid, moderately leveraged financial structure and focusing on sustainable operations so we can make many years of profits in harmony with our environment and neighbours. We look forward to 007 for another solid year of generating maximum shareholder value.
Achieving…
We made more money than we ever have before on the back of higher commodity prices as well as increased nickel volumes. Our net income jumped 84% to Rp1,55 billion on sales of Rp5,69 billion, ebitda doubled to Rp,778 billion and the net margin increased to 8%. We made more cash than we ever have before as net cash from operations more than doubled to Rp1,690 billion, which almost doubled our cash position at the end of the year to Rp1,18 billion. We generated free cash flow of Rp1,77 billion after three years of negative cash flows due to costs for our expansion. Our return on invested capital grew to 1%, more than double our hurdle rate of 15%, showing we created significant value in 006.
We made good on our strategy of moving downstream by successfully completing an important and lengthy nickel expansion called FeNi III, the main reason for our record-breaking profits. We aim to become a metals processing company, to squeeze as much value out of our vast reserves. Even though FeNi III didn’t produce as much as we’d hoped, we still doubled our nickel production to 14,474 tonnes.
We took some criticism for the management of the ferronickel expansion, when a leak occurred at the metal tap hole on July 1, causing the contractor (an unincorporated consortium of Mitsui & Kawasaki) to shut the unit down for repairs and extend the commissioning period by four months. Although still being finalized, we understand the cause of the accident was related to a furnace that was too hot, and a level of crude ferronickel that was too high and too viscous. We are determining what kind of recourse we have with the contractor.
We know that during the commissioning phase of a brand new smelter some setbacks are expected - that is why it is called a trial year. It is also true that aside from delays, large cost overruns are to be expected. However, there were very marginal cost overruns passed on to Antam. We paid US$0 million for 15,000 tonnes per year of ferronickel in terms of nameplate capacity, assuming 4MW of power and a .8% nickel grade, including a 10 megawatt dual-fired power plant and financing charges. This amount is far less than what we would pay today for the same project. We thus achieved a far shorter payback period of probably two to three years and a return on equity far exceeding our minimum 15%.
0
006 ANTAM Annual Report www.antam.com and we will run it at 85% of capacity or 6MW, which can produce about 11,000 tonnes of nickel contained in ferronickel, until such time as it safe to raise the power load. At 8MW and a .1% nickel grade we can produce 1,500 tonnes per year. These power loads are the optimal level of capacity utilization during the first couple of years of commercial operations and is the same strategy used by other world-class operators. We expect to produce 0,000 - ,000 tonnes of nickel contained in ferronickel from our Pomalaa facility under normal conditions. In 006, we achieved nearly double the nickel production and in 007 we expect to increase nickel production by about 40% and deliver 0,000 tonnes of production.We also achieved progress in terms of finding new customers. In 006, we began sending trial shipments of nickel ore to China, which resulted in million wmt of new orders for nickel ore sales in 007 to three companies in China. We also sent trial shipments of high carbon ferronickel to India. Aside from ferronickel, sales of nickel ore to China is the only other expected volume increase, as gold will likely hold steady at around ,900 kg or about 100,000oz. Until 010, once the Tayan Chemical Grade Alumina project begins operating, no other volume increases are expected. Antam’s exports of bauxite and nickel ore will probably come to a halt around 010 as the company moves entirely into processing.
When looking at 006, and the setback during the commissioning of FeNi III some may consider our record profits are solely due to the exceptionally high nickel prices. While this is a fair assumption, when you compare our performance to other beneficiaries of the high price environment we achieved similar results and in many cases outperformed our peers. The latest data available is provided by a PricewaterhouseCoopers study called “MineIndonesia 006”, released in January 007. It shows Antam’s 005 net profit margin increased to 6% and beat not only the rest of the mining sector in Indonesia but also the Top 40 global mining companies. Antam’s ebitda margin of 41% and return on equity of 1% also beat the global mining companies. In 006, we once again improved our margins and returns and likely retained our position as a top performer in the sector, with a net margin of 8%, and ebitda margin of 49% and a return on equity of 4%. We achieved peak performance because we boosted our production volumes, something few nickel companies succeeded in doing in 006 and positioned ourselves to benefit handsomely from the high price environment.
We continued to achieve low cash costs compared to the rest of the industry for gold, at US$84 per ounce, saprolite (high grade nickel ore) at US$0 per wet metric ton, limonite (low grade nickel ore) at US$9 per wmt and bauxite at US$9 per wmt, although our ferronickel cash cost increased 1% to US$4.40 per pound, placing us disappointingly in the top quartile of the industry. Lowering ferronickel costs is one of our major challenges, which increased mainly due to uncontrollable factors like fuel subsidies and the nickel price, which influences the cost of the nickel ore we buy from PT Inco. For those items that we have greater control, such as general and administrative costs, we were able to lower costs.
One of the three pillars of our corporate strategy is to maintain financial strength. We will never over-leverage our balance sheet and will increase our debt to a maximum of 60% of capital. Our average annual gearing ratio over the past decade is about 40:60. We understand the benefits of acquiring cheap debt to improve return on equity and lower our weighted average cost of capital, but it is standard practice to not pre-finance projects in the mining industry. We will acquire financing only when we are certain a project will advance. We are also a consistent dividend payer, with our payout ratio averaging about 40% since our 1997 IPO.
In 006, we lowered our long term debt net of current maturities 45% by Rp87 billion (about US$97 million). Our total long term debt of Rp1,070 billion was less than our total cash position which grew to Rp1,18 billion, leaving us in a net cash position at the end of the year. We decided to invoke a clause that allowed for the early redemption of our bonds for tax reasons. While the reputation in the bond market may have been temporarily damaged, we believe we achieved a significant improvement to our financial charges without significantly limiting our access to debt capital in the future. We achieved a stronger financial position and readied ourselves for the next growth phase.
An important part of our strategy is to continue to do what we do best, to build on our expertise and the business model that has served us well for over three decades. However, when we don’t have experience, yet have the reserves, we form joint venture partnerships. In 006, we achieved progress with our next major growth project, the Tayan Chemical Grade alumina project which will process our large bauxite reserves in West Kalimantan. The major step forward was the March signing of the long-negotiated Joint Venture Agreement with our partners from Japan and Singapore. We have the largest
majority stake of 49%, but we plan to exercise an option to hold 51%. Provided the updated feasibility study shows good returns, we hope to begin the nearly three-year construction period at the end of 007.
It was a year of achievement as shareholder returns grew significantly, with our share price rising 1% to end at Rp8,000, again outperforming international, domestic, general and mining indices. We achieved a market capitalization of over US$1 billion, and became more recognized, and more owned, by international and domestic world-class investors.
Exploring…
Exploration is key to the future of any mining company. At its most basic, a mining company is only as good as its reserves in that the life and profitability of the company is finite, determined by the amount and quality of the reserves. We take exploration seriously and increased our exploration spending by 7% to Rp95 billion in 006, with significant results. We will increase it again to Rp154 billion in 007. Most of our exploration is focused on nickel drilling, but also gold and bauxite exploration activities.
However, it was a year of exploration for more than just new ore deposits. As we finalized the construction on FeNi III, an important, challenging and lengthy growth phase came to an end. In 006, we began to enter into a new phase of growth and to explore all the possibilities available to maximize value creation. While Antam has long had a robust project pipeline, including the Tayan Chemical Grade Alumina project, due to large cash flow generation we began to explore other interesting options.
We explored the opportunity to build a 400,000 tonnes per year smelter grade alumina project with Chinese partners, which would upgrade our existing facilities at the Kijang bauxite mine. While the outlook for alumina has begun to look less favourable, we can produce it for less so the project is still likely feasible. We investigated the Obi Iron Cap project, which would use overburden at Obi Island to make sponge iron containing nickel for sale to steel manufactures. We also surveyed the different possibilities of developing our largest nickel ore deposits. We held discussions with two international partners, one from Japan and the other from Australia, with regards to the best fit with our plans in consideration of financing and technology. While these projects were in the initial, mostly feasibility study phase, they are a part of our project pipeline and will be, in one form or another, the source of future value.
We also explored the possibility of maximizing the value from the Pomalaa ferronickel facility, by upgrading the rotary kiln and rotary drier of FeNi II line, the furnace of which was recently upgraded. We also considered the best way forward with FeNi I, which will soon be in need of an overhaul. Rather than conduct this overhaul, we explored the idea of feeding treated ore from FeNi I line and using it in FeNi II smelter.
We explored the possibility of making acquisitions and specifically of making gold acquisitions. We made a bid on a .5 million ounce deposit for sale at Martabe, Sumatra, and studied the opportunity of acquiring a % stake in Newmont’s Batu Hijau gold and copper mine. For the first time we explored the opportunity of investing outside of Indonesia. We also explored which of our minority-interest joint venture projects, in nickel, gold, lead/zinc and diamonds that are at varying stages of development, we wanted to support and/or increase our interest.
Our Challenges and Risks
We calculate if the average spot nickel price in 007 is US$15 per pound, when consuming 800,000 wmt of the ore from PT Inco, our cash cost could rise to an average of US$5.1 per pound. If the average spot nickel price in 007 is US$0 per pound, consuming the same quantity of ore from PT Inco, then our cash cost could rise to an average of US$5.68 per pound. If the average nickel spot price decreases or increases, so to will our average ferronickel cash costs. As we’re using slightly lower grades, in 007 we’ll need about 1.65 million tonnes of saprolite to make 0,000 tonnes of nickel contained in ferronickel. We estimate if Antam only used ore from our roughly .5 million wmt reserves at Pomalaa, the cash cost of producing ferronickel would decrease to US$.80 per pound. If we only use ore from our Mornopo mine (North Maluku) the cash cost would decrease to US$4.18 per pound and if we use a combination of 1 million wmt of ore from our Pomalaa deposit and 650,000 wmt of ore from Mornopo the cash cost would decrease to US$.98 per pound. We will mix the ore from PT Inco with our own less expensive ore, which may lower the total ore cost. We will do our best to minimize costs in all other areas. But we recognize this is a good problem to have, as while it is unfortunate that ferronickel cash costs are increasing, we know the price we charge for our ferronickel is increasing at a greater pace and margins are widening.
The performance of the international spot nickel price, which increased 64% to US$10.95 and looks set to continue to increase in 007, has been nothing short of spectacular. When the price of something increases this high, there is always the risk of a sharp decrease. We view that nickel prices, which are mostly affected by the US dollar, inventory levels and global Industrial Production growth, could average around $15 - $17 per pound in 007 and should stay stronger, on a historical basis, until the end of the new decade, when new nickel supply is expected. We as a producer are most focused on our costs and production volumes, as we can’t control prices. We did do some limited hedging in 006, but lost out on some upside at the end of the year when the spot price exceeded the strike price on the call options we sold. In 007, we do not plan on conducting further nickel or gold hedging.
Much has been made of China and its seemingly insatiable demand for natural resources. While we are increasing our links to China and recognize China is the main cause of such high demand growth over the past three years, we feel we are safe from serious damage should the fortunes of China change dramatically; the feared “hard landing”. This is because we generate relatively small revenues from exports to China and only one of our current future projects is linked to China, although more are likely. If China tanks, commodity prices will follow, but we are lowering our costs and expanding our output in order to maintain our consistent annual revenue and income growth. We are conducting feasibility studies for our future projects using price assumptions that are far lower than today’s current levels.
There is a risk that Indonesia passes mining legislation which prevents the export of raw materials, and would therefore limit or prevent Antam’s ore export program. We do not view this is a significant risk as we believe any ban on exports will be implemented in stages and in synch with our own plans to stop exports around 010.
We would like to thank all those people who helped make 006 such a great year for Antam. We look forward to 007 for another solid year of performance, profit, returns and achieving our main goal of maximizing shareholder value.
Antam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
On behalf of the Board of Directors
Running Antam
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006 ANTAM Annual Report www.antam.com From Left to right:Ir. Suryo Suryantoro, M.Sc. , Ir. Yap Tjay Soen, MBA , Ir. Wisnu Askari Marantika, Ir. Supriatna Suhala, M.Sc. , Prof. Dr. Ir. Irwandy Arif, M.Sc.
4
006 ANTAM Annual Report www.antam.comIr. Wisnu Askari Marantika
President Commissioner
Joined Antam in 004. Graduated with a degree in Electrical Engineering, Bandung Institute of Technology (ITB) in 1976. Previously held various key positions at PT Telkom Tbk such as Engineering Director (199-1995), Technology & Planning Director (1995-1996), Senior Staff of President Director (1996-1997), and Senior Advisor to Board of Commissioner (00-004). He had executive positions in various companies such as President Director of PT Elektrindo Nusantara (1997-000), President Commissioner of PT Komselindo (1998-1999), President Commissioner of PT Indosat Tbk (000-00) and President Director of PT Infoasia Sukses Mandiri. Currently the Vice President Commissioner PT Infoasia Teknologi Global Tbk and Commissioner of PT Infokom Elektrindo. President Commissioner of Antam since 004.
Ir. Suryo Suryantoro, M.Sc.
Commissioner
Joined Antam as a Commissioner in 1999. Graduated with a degree in Mining Engineering, Bandung Institute of Technology in 1974, and received a Master of Science degree in Geology and Mineral Exploration from School of Geology, University of New South Wales in 1984. Followed numerous management training sessions such as Sepadya (1989), Sespanas (199) and Lemhanas (00), geophysics training at KUL-Belgium (1975), mineral exploration satellite data processing at USGS-USA (1986), mineral exploration at Western Australia School of Mines (1989). Began his career at the Department of Mines and Energy as Expert Staff of Gephysics Exploration at the Directorate of Geology (1974-1978), Section Head of Computer Data Processing at Directorate of Mineral Resources (1979-1988), Sub Directorate Head of Geophysics Exploration and Drilling at Directorate of Mineral Resources (1989-1995), Secretary at the Directorate General of Geology and Mineral Resources (1995-1999), Director General of Geology and Mineral Resources (1999-001), Coordinator of Senior Advisors to the Minister of Energy and Mineral Resources (001-00), Head of Education and Training Agency for Energy and Mineral Resources (00-006) and currently Inspector General of the Ministry of Energy and Mineral Resources.
Ir. Supriatna Suhala, M.Sc.
Commissioner
Joined Antam as a Commissioner in 1999. Graduated with a degree in Mining Engineering, Bandung Institute of Technology in 1975, and received a Master of Science degree from School of Mines, The University of New South Wales, Sydney, Australia in 1986. Held various key positions at Department of Energy and Mineral Resources such as Head of Mineral Technology Research and Development Centre (1995-1997), Director of Mining Engineering at the general Mining Directorate General (1998-1999), Head of Foreign Coordination Bureau (1999-001), Inspector at the Inspectorate General (001-00), Head of Research and Development Centre for Energy and Electricity (004-005). Currently Head of General Bureau of the Department of Energy and Mineral Resources.
Ir. Yap Tjay Soen, MBA
Independent Commissioner
Graduated with a degree in Engineering, McGill University, Canada, in 1976, and received a Master in Business Administration in 1980. Held various positions at Citibank Indonesia (1980-1988), Director at PT Toyota Astra Motor (1989-199), President Director of PT Astra Sedaya Finance (199-199), Chief Executive Officer of PT Astra International Auto 000 Group and affiliated companies (199-1998), Chief Operating Officer of Asia Food & Properties, Singapore (1998-1999), and Deputy President Director (Finance, Accounting and Investor Relations) at PT Bank International Indonesia Tbk (1999-001), Independent Commissioner of PT Bank BNI Tbk (004-005). Since 199 President Director of PT Tuban Petro Chemical Industries, Independent Commissioner of PT Bank Mandiri Tbk since 005. Independent Commissioner of Antam since 00.
Prof. Dr. Ir. Irwandy Arif, M.Sc.
Independent Commissioner
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006 ANTAM Annual Report www.antam.com From Left to right:Ir. Alwin Syah Loebis, MM., Ir. Syahrir Ika, MM., Ir. Dedi Aditya Sumanagara, Ir. Darma Ambiar, MM., Kurniadi Atmosasmito, SE., MM.,
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006 ANTAM Annual Report www.antam.comIr. Dedi Aditya Sumanagara
President Director
Joined Antam in 1975. Graduated with a degree in Mining (Exploration) Engineering, Bandung Institute of Technology in 1974. Held various key positions at Antam for 1 years before becoming General Manager of the Geomin Unit (1988-199), General Manager of the Gebe Nickel Mining Unit (199-1994) and Director of Development (1994-1997). President Director since 1997.
Ir. Darma Ambiar, MM.
Director of Development
Joined Antam in 198. Graduated with a degree in Mine Metallurgy Engineering, Bandung Institute of Technology in 1981 and received a Master degree in Management from Prasetya Mulia. Held various key positions at the Company for 1 years before becoming the Head of Strategic Planning for Research of Mining Authority (00). Director of Development since 00.
Kurniadi Atmosasmito, SE., MM.
Director of Finance
Joined Antam in 1980. Graduated with degree in Management, from the Krisnadwipayana University in 1986 and received a Master degree in Management, LPMI in 1998. Held various key positions at the Company for years before becoming the Head of Internal Audit (00-00). Director of Finance of Antam since 00.
Ir. Alwin Syah Loebis, MM.
Director of Operations
Joined Antam in 198. Graduated with a degree in Chemical Engineering, Bandung Institute of Technology in 198 and received Master degree in Management from Prasetya Mulia. Held various key positions at the Company for 0 years before becoming the Deputy Director of the Nickel Unit (00). Director of Operations since 00.
Ir. Syahrir Ika, MM.
Director of HR & General Affairs
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006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Questions and Answers with the Board of Directors
Q. How do you see Antam 5 years down the road? A. Mr Dedi Aditya Sumanagara:
We will become a much bigger company with a global competitive advantage in the international market. To reach that level, we will continue to focus on what we do best, which is nickel, gold and bauxite in Indonesia. We will move downstream into more processing activities as the returns are higher. We will lower costs by converting to a less expensive fuel. For gold we are looking at making an acquisition as our reserves are depleting. We are expanding into China and forming partnerships with the Chinese to build a smelter grade project but were not putting all of our eggs in one basket and will maintain a diversity of customers around the world. We are not a get-rich-quick operation and will grow in a sustainable manner to ensure long term profitability. We like a strong balance sheet and will further improve our financial structure to ready us for the next round of leveraging. We will continue to maximize shareholder value.
Q. What is the status of FeNi III considering the problems it has experienced? A. Mr Alwin Loebis:
The problems faced by FeNi III are common in the industry. Mining is slow yielding, capital intensive and risky. If producing nickel was such an easy task, we would not have a serious short supply of nickel today. Basically, the problems have been fixed. The EPC contractors completed the final plant test in December 006 and handed-over the new smelter to us in January 007. During its early years, we will operate FeNI III at 85% - 90% of its capacity, like other world class operators in the first one or two years after commercial operations. FeNi III is a major achievement for Antam and is generating tremendous value for Antam in this high nickel price environment.
Q. Now that FeNi III has started commercial operation, do you have any other plans to move further downstream?
A. Mr. Darma Ambiar:
We have several growth projects in our pipeline and are always exploring others. The Tayan Chemical Grade Alumina and Kijang Smelter Grade Alumina projects will process our bauxite ores, FeNI IV will process our saprolites, a hydromet project will produce nickel cobalt from our limonites, and the Obi Iron Cap project will process overburden to produce sponge iron containing nickel. The Tayan project is at the most advanced stage as we will form a joint venture company in early 007 with our partners from Japan and Singapore. We have the largest minority stake of 49%, but we have an option to hold 51%. Like all of our projects, we will use aggressive project financing and make a minimum 15% ROE.
Ir. Dedi Aditya Sumanagara President Director
Ir. Alwin Syah Loebis, MM. Director of Operations
Q. What is your approach regarding human resources management? A. Mr. Syahrir Ika:
We view our workforce as a valuable asset that needs to be developed. We develop and improve our workforce’s productivity and work satisfaction through increased training and better alignment of performance with compensation. In order to increase the productivity as well as the welfare of our employees, we will reduce our headcount from ,958 employees to ,566 employees by 009 through generous early retirement programs. We will also improve the quality of our workforce by increasing the proportion of our university graduates – especially those with engineering backgrounds. We will increase the proportion of our engineers from 4% to about 10% in 009.
Q. What is your philosophy with regards to debt? A. Mr. Kurniadi Atmosasmito:
Maintaining financial strength is one of our strategies to increase shareholder value. We will maintain a solid balance sheet and will keep our debt level to a maximum 60% of capital. While we realize that acquiring debt will improve our ROE and lower our WACC, we will only acquire debt when we are certain a project will advance.
I am pleased we were able to again reduce our debt by 45% to Rp1.1 trillion in 006. We refinanced the bonds with less expensive bank loans to reduce our financial charges, which had increased significantly due to the cancellation of Indo-Mauritius taxation agreement. So we are ready to finalize our investment plans, find a suitable acquisition, and if need be acquire debt to grow. Ir. Darma Ambiar, MM.
Director of Development
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006 ANTAM Annual Report www.antam.comAntam in a Nutshell From Us to You Running Antam Management Report Owning Antam Governing Antam
Human Resources Management
Human resources are among Antam’s most valuable assets. Antam develops and improves its workforce’s productivity and work satisfaction through, among other things, increased training and better alignment of individual performance with compensation.
In 006, Antam had a total work force of ,958, a decrease of 7.8% from 005 due to retirements and the early retirement program. To improve work force productivity and welfare, Antam plans to reduce the workforce further to ,566 by 009.
Out of Antam’s total ,749 permanent employees in 006, 48 employees (1%) are university graduates and 10 employees of them are from engineering backgrounds (4.4% of total permanent employees). As Antam will expand its operation and increase its processing activities, Antam plans to increase the proportions of its engineers to 10% of its permanent employees by 009.
Training Program
Antam considers training very important to enhance knowledge, skills, motivations, attitudes, productivity and career advancement of its workforce. In 006, Antam spent around Rp6 billion on employee education and training, an increase of 7% compared to 005. This amount is 1.7% of Antam’s net profit and 4% of Antam’s employee cost. The average training expense per employee was Rp8.8million, an increase of 87% compared to 005.
As Antam increased its production and sales while reducing its workforce, Antam’s employee productivity in 006 showed improvements compared to productivity in 005 as operating profit per employee increased 14%, net profit per employee increased 101%, Saprolite production per employee increased 11%, ferronickel production per employee increased 114%, and gold production increased 7%.
Succession Planning
Antam has a succession planning program to select leaders based on systematic and objective assessments of skills and other criteria. This program uses the following process: defining nomination criteria; identifying candidates; identifying candidates’ development needs, providing training to candidates, measuring training results, and reviewing effectiveness of the s