Apr 15, 2011

Bumi Minerals & warrants exercise

Gold and non coal miner PT Bumi Resources Minerals Tbk (BRMS) is estimated to post a flat net income in 2011 after it recorded Rp764.60 billion last year as gold production drop may be engulfed by PT Newmont Nusa Tenggara (NNT).
"As a decrease in NNT's gold production, net income in 2011 is estimated to be flat," said  BRMS Finance Director Yuanita Rohali said yesterday.
BRMS indirectly controls 18% shareholding in gold miner NNT via PT Multi Capital. From NNT's profit last year, Bumi Minerals secured US$143 million or Rp1.28 trillion dividend.
Besides NNT, Bumi Minerals is also dependent on revenue from its subsidiary Bumi Resources Japan Company which is estimated to post US$20 million revenue. BRMS is keen to use NNT's dividend to pay a US$219 million debt facility to Credit Suisse in 2012.
BRMS plans to spend US$240 million capital expenditure this year. The expenses will be used to develop Konblo Bumi of US$35 million, Citra Palu of US$30 million, Gorontalo of US$35 million, Mauritania of US$40 million, and Dairi of US$100 million,
The company estimates to spend US$275 million capex next year with US$100 million will be spent for Dairi Prima.
Warrants exercises
Simultaneously with the BRMS IPO, Bumi Minerals has issued and allotted 2.2 billion series I warrants to its new shareholders whereby each exercising BRMS shareholder holding three BRMS shares received two series I warrants. Each series I warrant entitles the warrant holder to buy one BRMS share at Rp700 per share or at a 10.2%. premium to the BRMS IPO Price.
Referring to the price, assuming all warrants would be exercised at Rp700, Bumi Resources could obtain Rp1.54 trillion in cash. Warrant holders will be able to exercise their rights starting from 2 June 2011 until 30 November 2012.
BRMS is now traded at Rp720 per share. By exercising the warrants, BRMS share holders could obtain Rp20 per share gain if they prefer to sell the shares.
CIC-BRMS share swap
In a company report published recently by Nomura Indonesia, there are three scenarios to settle US$600 million debt to China Investment Corporation (CIC) in October 2011, earlier payment than the schedule in 2013. The scenarios are swapping the debt with Vallar Plc shares, BRMS shares, and Bumi shares.
During swap the debt with BRMS shares, Nomura expects a couple of steps under this scenario. Bumi would issue an exchangeable bond to CIC to pay the US$1.9 billion loan (total debt). The exchangeable bond could be exchanged for 23.16 billion shares of BRMS, assuming a strike price of Rp710 which is the
closing price as of 11 April 2011.
BRMS would issue 23.16 billion new shares to CIC. Post the deal, Nomura sees the shareholding structure of BRMS would be: CIC (48%), Bumi (46%) and others (7%).

Disclosure: No position at the stock mentioned above.
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