Posts Tagged ‘emirates’

Miners to benefit from change to Indonesian law

copper-miningUnder Indonesian law, foreign mining companies operating in the country are required to sell 51% of their local holdings back to the government after 5 years of commercial operation. However, Newmont (NYSE : NEM), will only be asked to relinquish 17% of its subsidiary, PT Newmont Nusa Tenggara (PTNNT), as 20% of this entity is already held by a local partner. An international arbitration panel on March 31 gave Newmont and minority partner Sumitomo Corp. a 180-day deadline in which to divest 17% of PTNNT to local buyers, ruling that the companies were in default of their contract of work for failing to meet divestiture schedules in 2006-2008.

With the Indonesian government estimating the total value of PTNNT at $4.9Bn , Newmont & Sumitomo are locked ina valuation battle with the governmet & local companies, who are keen to pick up a share in the companies gold & mining concerns. Some 10% of PTNNT is earmarked for regional governments in Sumbawa, the location of the company’s Batu Hijau copper and gold mine, and the central government will have first right of refusal on the rest of PTNNT.

“We are still discussing the pricing formula” for the stake in PTNNT, with other government departments” Bambang Setiawan, director general at the Department of Energy and Mineral Resources “the department is also conducting preliminary negotiations with Newmont over the sale of the unit as yet it is unclear when a deal might be reached.”

It’s not all grim news for Newmont though. This week, Indonesian officials met regards mining rights in areas of protected forest. As we have written before, (Indonesia the long road back), The country has vast natural resources that Indonesia is keen to exploit, using the above formula to develop modern facilities in the country. Now ministers are expected to pass a decree that will allow mining companies to carry out underground mining activities in areas of protected rainforest.

“The presidential decree will give legal basis so that underground mining is allowed in protected forest areas.The existing law only forbids open-pit mining in protected forest areas,”  said Setiawan.

Information from the mining & energy ministry show that Indonesia has mineable nickel reserves of 547 million tonnes, 112 million tonnes of bauxite and 43 million tonnes of copper,  tin stand at 336,911 tonnes, measured in terms of refined tin, while gold reserves were 4,341 tonnes,

Two other mining majors that will also look to profit from this law change are Rio Tinto (NYSE : RTP) & Freeport-McMoran (NYSE : FCX).

Rio Tinto is currently looking to develop a new nickel operation on the island of Sulawesi, Rio estimate that the mine could produce up to 46,000 tonnes of nickel metal a year, estimated investment costs stand at $2 Bn. Sulawesi is densely forested & the change in law should mean that the company can expand its operations significantly.

Meanwhile, Freeport-McMoran has been active in Indonesia for a much longer time. PT Freeport Indonesia has operated the Grasberg mining complex since the early 70’s, Grasberg is one of the world’s largest single producers of both copper and gold & as Freeport claims, contains the largest recoverable reserves of copper and the largest single gold reserve in the world. Grassberg will continue surface mining until 2015, at which time it will then begin sub-surface mining, according to Freeport’s website.

Indonesia looks to be well on the way to attracting large amounts of FDI into its commodity sector, providing an economic boost to local populations spread across this vast country. India & The Emirates have already committed to investing $4Bn into an aluminium smelting plant, with fully integrated power & logistics last year, with the relaxation of the rules governing mining concessions, the country could well benefit from China’s projected expansion.

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Saudi Telecom unveils $10B warchest

KUWAIT-SAUDI-TELECOM

State owned fixed line monopoly Saudi Telecom (STC) unveiled a $10b facility, which will be used to take part in a number of Middle Eastern license acquisitions which are due to be launched in 2009.

“”We can do SR40bn of acquisitions in the next few years. We have no problems with doing that at all”” Khalid al-Ghurair, Saudi Telecom Mobile  has SR40bn ($10.7bn) available for the acquisition of new licences and stakes in other operators, Khalid al-Ghurair, general manager for financial planning and budgeting at the company, tells.

In January, Bahrain and Iran will award new licences or management contracts. Tunis has set a deadline of 5 May for bids for a new telecoms licence, and Algeria, Morocco and Iraq have also committed themselves to auctions. In addition, Lebanon is planning to issue management contracts for two mobile telecoms networks before the end of the year, and Jordan is also planning to auction its first 3G network in 2009. The number of licences on offer means that regional operators will be under pressure to find funding to take advantage of as many of the growth opportunities as possible.

STC is pretty much a late comer to the international market, its hand being forced when its mobile monopoly was broken in 2005. It lost its mobile service monopoly to Etihad Etisalat (Mobily) in 2005, while a consortium led by Kuwait’s Mobile Telecommunications Co (Zain). made the highest bid for a third mobile license in March, offering $6.11 billion. Mobily was able to capture 30 percent of the market within 18 months of starting operations.

In response, STC made some acquisition plays in 2007 , when it acquired a 25 % stake in Malaysia’s Maxis and 26 % of Kuwait’s third mobile licence. Earlier this year, STC acquired a 35% stake in Saudi based Oger Telecom, which brought interests in Turkey (Turk Telekom / Avea) & South Africa (CellC). Further regional acquisitions will probably remain at the same level, STC seems comfortable with taking non-controlling stakes & spreading it’s exposure.

“”We could have gone for majority with Maxis, majority with Kuwait and majority with Oger Telecom, but we are very cautious,”” says Al-Ghurair. “”We are not risk takers.”” In total, Saudi Telecom spent SR24.5bn on the three international deals. It has built up debt of 1.3 times its earnings before interest, tax, depreciation and amortisation (ebitda), partly through the acquisitions, according to Standard & Poor’s.

 

STC has enjoyed monopoly status regards fixed line, up until this year, regulators have now opened the market & there are three new players planning to launch services in 2009. The Optical Communications Company (OCC) is a joint venture between local partners, Verizon (NYSE – VZ) & MSV favourite Millicom International, with other franchises being put together by Hong Kong’s PCCW  (HK – 0008) & regional player Batelco (Bahrain Telecom). The Kingdom remains a strong growth opportunity for fixed line operations as less than 17% of the population currently enjoy fixed services & internet penetration remains at circa 4%.

Verizon has just announced that it will be investing $3B into the OCC joint venture, whilst the PCCW consortium has failed to raise cash via an IPO as expected, due to poor market conditions. Part of the pre-requisite for any of the deals is for the Saudi state pension fund to take a 5% stake, which until now it has demurred to do.

STC received good ratings earlier this  year, Standard & Poor’s Ratings Services assigned STC with ‘A+’ long-term and ‘A-1’ short-term foreign currency corporate credit ratings. Moody’s Investors Services assigned A1 long term local and foreign currency issuer ratings, which will obviously help buoy shareholder confidence & also help in capital markets for the upcoming licensing round. Local competitors such as Zain, have exhausted themselves financially with recent rapid growth in Asian & African markets, which should allow STC to make some real penetration in 2009.

The main competition for me will be Emirates based EtiSalat, which has access to some deep pockets, as it is effectively owned by the Al-Makthoum family, EtiSalat has already managed to acquire a license in Iran & has been expanding into Africa for some time. If STC is to compete, I think they will have to look at raising more than $10B & the S&P / Moodys ratings will surely come into play to that effect. Whatever the outcome at a business level, I can only conclude that this is good for the Middle Eastern region, freeing up access & allowing mass communication on a greater scale.

UPDATE (05/01/09) : Saudi Telecom eyes government stake in Batelco

Saudi Telecom Co (STC) is eyeing the Bahraini government”s 36.7 percent stake in Bahrain Telecommunications Co (Batelco), a Kuwaiti newspaper said on Sunday. Local newspapers said in an unsourced report that the Saudi firm had submitted a request to Bahrain”s biggest telecoms operator to buy the stake.An STC spokesman could not be reached for comment while a Batelco spokeswoman declined to comment on the report because it related to shareholder issues.
Mumtlakat Holding Co, the investment arm of the Bahraini government, holds a 36.7ـpercent stake in Batelco, according to its website. Mumtalakat”s spokesman Adel AlـAnsari could not immediately comment on the newspaper report.
Batelco is a shareholder in Etihad Atheeb Telecommunications Co, one of three firms licensed to operate new fixedـline networks which would end STC”s monopoly status in this segment.

UPDATE 2 : (29/01/09)  : From Mobile News on WordPress : STC Bags 3rd Mobile Licence in Bahrain

The Telecommunications Regulatory Authority (TRA) today announced that Saudi Telecommunications Company (STC) is the successful bidder for the third mobile Licence in Bahrain with a bid of Bahraini Dinars eighty six million six hundred eighty seven thousands (BD 86,687,000.000)