JAKARTA (TheInsiderStories) – The mining company under Astra Group, PT United Tractors Tbk (IDX: UNTR) targeting the gold sales volume in 2021 to reach 340,000 ounces (oz), said the spokeswoman today. This year, the contractor aimed to sell around 320,000 oz of gold.
To support the targets, the miner allocates capital expenditure of US$120 million for its gold mining business division to build the processing plant, tailing management, and the operation improvement. This allocation is equivalent to 40 percent of the total budget of the group in 2021 of $290 million.
The corporate secretary, Sara K. Loebis, explained the 2020′ target is below the initial targets 360,000 oz due to the operational restrictions of the Martabe gold mines during the pandemic. In November, its unit, PT Agincourt Resources has sold 21,000 oz of gold, a slight decrease compared to the previous month’ acquisition of 22,000 oz.
As the group, United Tractors has sold 299,000 oz of gold, 22.5 percent lower than last year of 386,900 oz. In the third quarter of this year, the gold business units posted a profit of Rp2.22 trillion, growing 8.38 percent from the same period of 2019 worth of Rp2 trillion.
Loebis said, in the first half of 2020, the Indonesian heavy equipment producer has spent the budget for its unit, PT Pamapersada Nusantara, and for the exploration of Martabe mine in North Sumatera. According to Moody’s Investor Service, the declined in coal prices will weigh on revenues and earnings at United Tractors’ mining services and coal mining businesses.
At the same time, demand for its mining and construction equipment will continue to trend weakly as mining companies put off plans for capital expenditure and construction activity gets suspended or delayed due to the coronavirus outbreak. While the company’ gold mining and construction businesses are not meaningfully exposed to the coal sector, they are nonetheless vulnerable to virus-related operational disruptions and weakening macro conditions.
Moody’s expects United Tractors to maintain its excellent liquidity position, supported by cash on hand of around Rp17.1 trillion ($1.1 billion), a fully undrawn $300 million revolving loan facility due October 2023, a fully undrawn $400 million club loan maturing November 2021, and modest free cash flow generation expected through the next 12 – 18 months.
Liquidity is further supported by the company’ cash containment measures during the pandemic, including a 40% reduction in planned capital expenditure for 2020 to IDR4.0 trillion. Aside from amortization payments of Rp2.4 trillion annually under its $700 million term loan, the nearest debt maturity is a $200 million revolving credit facility which will come due in March 2022.
United Tractors’ rating continues to incorporate a one-notch uplift from its parent Pt Astra International Tbk (IDX: ASII), reflecting the likelihood of its parent providing credit support in the event of distress.
The miner faces elevated environmental risks associated with the coal mining industry, including carbon transition risk as countries seek to reduce their reliance on coal power. This risk is somewhat mitigated because their’ customers supply coal primarily to Asia, where coal will remain a major power source because of significant existing capacity and the continued growth in power demand.
United Tractors is a distributor of heavy equipment to the mining, construction, forestry and agriculture sectors, and a provider of mining contracting services to the coal sector in Indonesia. The company has three other segments focused on domestic coal production, gold mining and industrial and commercial construction.
The publicly listed firm is 59.5 percent owned by Astra and the remaining hold by public and traded on the Indonesia Stock Exchange.
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