Key Investment Highlights
- The 2nd Largest Pure-play Gold Producer in Southeast Asia, with Significantly De-Risked Near-term Expansion Potential
PT Archi Indonesia Tbk (Archi) is the 2nd largest pure-play gold producers in Southeast Asia, based on the gold production volume in 2019. Pure-play means that majority of the Company’s contribution of revenue is driven from the gold products (2020 contribution: 98%). It means that Archi is categorized as one of the pure gold stocks proxy in Indonesia capital market.
Archi operates Toka Tindung Gold Mine through its wholly-owned subsidiaries, PT Meares Soputan Mining (MSM) and PT Tambang Tondano Nusajaya (TTN), which both are the Contract of Works (CoWs) holders. The concession area covers around 40,000 hectares, with 5.5 moz of mineral resources and 3.9 moz of ore reserves have been identified as of 31 Dec 2020. Toka Tindung Gold Mine has established operation with 200+ koz of Annual Gold Production and 10 years of uninterrupted production history.
Toka Tindung Gold Mine is also having significantly de-risked near-term upside expansion potential, with lower capex requirements (average yearly capex requirements only around US$70 million), multiple drilling and data points have been identified, expected processing capacity expansion, and also equipped with larger mining fleets to support its operation.
- Strong and Proven Exploration Track Record Supports Significant Development Potential and Exploration Upside
Since its first exploration activities held in 2009-2010, Archi has been able to identified additional ore reserves every year. The total additional Ore Reserves between 2011-2019 reached 3.5 moz, and with total gold produced up to 1.9 moz. In 2020, Archi has succeeded in discovering another addition of 1.6 moz of ore reserves, which make the total ore reserves up to 3.9 moz as of 31st December 2020. Therefore, Archi has the highest replenishment ratio in the industry. The exploration up to this date only covers less than 10% of the total concession areas, which is in the Eastern Corridor.
Mining operations at the Toka Tindung Gold Mine have been conducted since 2009, with initial commercial production in April 2011 and first full year production in 2012. We have been successful in undertaking exploration activities since 2010. From 2010 to 2020, our exploration program has discovered gold Ore Reserves of 5.1 Moz at a total capital cost approximately of US$125 million, representing discovery of ounces of gold at an average cost of US$24 per oz.
Within the concessions area, Archi has identified significant potential upside of ore reserves discovery, ranging from 5.3 moz – 13.0 moz (FS conducted by ENMINTECH, and verified by SRK Independent Consultant) which consists from Near-Mine targets, Western Corridor targets, and Greenfield targets. With the expected Processing Plant capacity expansion to reach 8.0 Mtpa by end of 2025, Archi could produce up to 450 koz of gold per year, and become the largest pure-play gold producer in Indonesia. Full report of Archi’s Mineral Resources and Ore Reserves conducted by SRK can be downloaded here.
- Structurally Low Cost Base with Proven Track Record of Efficient and Uncomplicated Operations
The Toka Tindung Gold Mine is one of the most cost competitive gold producers globally according to CRU, as we are placed at the bottom of the first quartile of the global AISC curve in 2019. In 2018, 2019 and 2020, we produced 269.9 koz, 261.3 koz and 206.8 koz of gold, at AISC of US$612.7/oz, US$683.7/oz and US$822.6/oz, respectively.
Archi has also demonstrated strong track record of historical cost reduction initiatives for its operations, including:
- upgrading mining fleets used by our mining contractors;
- appointing new mining contractors with better terms;
- improving processing plant;
- opting for cheaper power source;
- using redundant pits to capture and store rainwater; and
- using redundant pits to store waste.
- Strong and Sustainable Free Cash Flow Generation Even at Low Gold Prices
During our operation since 2011 up to 2020, Archi has been consistently recorded strong margin and ample cash flow, with very limited debt to finance its working capital as well as its capital expenditures. In addition, we have also consistently paid out dividend to maximize the return to our shareholder.
- Strong Sponsorship from a Reputable Indonesian Conglomerate with a Track Record of Building World-class Operations
Archi is majority owned by PT Rajawali Corpora (“RC”), a leading investment holding company in Indonesia with various business portfolio in multi-industry and proven track record of building world class operation.
RC plays a major role in Archi’s growth and development since its inception into the company in 2009, and RC has been assisting us in establishing prominent relationship with the central and local authorities. RC also provided crucial supports and assistance in bringing Toka Tindung Gold Mine into commencement and production in a timely manner.
In addition, RC has returned significant capital into exploration and put in place a management team with extensive technical experience as well as general management and financial expertise from which the company has benefitted.
- Highly Experienced Senior Management
- Strong ESG Commitment with Established Policies
Responsible mining is a top priority for Archi. In respect to Environmental, Archi has set out EMS policy and biodiversity policy, as well as planning for the Green House Emission, water use, land use, tailing storage facility and also reclamation and mine closure. On the Social aspect, Archi always try to leverage economic opportunity for the surrounding community in order to generate sustainable long-term benefits. While in the Governance aspect, Archi has been consistently demonstrated good corporate governance practice in all of its business operations.
In early 2021, Archi engaged PT Lorax Indonesia, to conduct an independent assessment of the Environmental, Social and Governance (ESG) performance at the Toka Tindung Gold Mine operations. This assessment adopted the framework of the Precious Metals Scorecard developed by Credit Suisse, with some modifications necessary for its application. The ESG scoring conducted is based on a general assessment of the Company’s compliance with international best practice and direct comparison of metrics and ESG performance of the Company against other International and Indonesian publicly-listed metal mining companies operating in Indonesia. The results are satisfactorily, with score “Outperform” for Social aspect, and score “Exceed” for both Environmental and Governance aspects. Full report of ESG Assessment on the Company by PT Lorax Indonesia can be downloaded here.