PT Bumi Resources Tbk (BUMI) Earnings Call Transcript

Okay. So good afternoon, everyone. Welcome to Bumi's First Half 2025 Earnings Call. I'm [indiscernible] from CLSA Research team. We'll host today's session. So from Bumi, we have Pak Ashok Mitra, CFO of Bumi; and also Pak Christopher Fong, Adviser. So without further ado, I'll pass it on to Bumi's management team. We can start with the presentation first, and then we will proceed with the Q&A session afterwards. Yes. So please go ahead, Pak.

Okay. So good morning, everybody. So I'll just do the -- next page.

Can we go to the next page.

The financial update for the first half of 2025. The production first half was 35.9 million tonnes versus 37.7 million tonnes. so basically, the reduction was due to heavy rainfall in KPC during the first half, but we hope to make it up in the second half. The weather is dry in KPC in -- both in July and August. So we hope to catch up the production going forward. The realized coal prices in first half of '25, we had a drop from $75 million per tonne to almost $61 per tonne compared to 2024. So we had a drop almost $14. This is mainly due to 2 reasons: oversupply in the market, primarily from Indonesia because based on global thermal coal export of 1 billion tonnes, almost 500 million tonnes is supplied by Indonesia. So there is an oversupply in the market. India -- Coal India Limited, the domestic producer has produced a record 1 billion tonnes for the financial year '25. So what India is doing is they are buying coal from Russia and Colombia at a much reduced prices. And then they are blending the coal high-grade coal with the low-grade high as coal and bringing down the cost. So there has been a sharp deterioration in the coal price in the market. And second -- thirdly, also China domestic production has also gone up. The hydropower was also good. So all these factors had an impact on the price as well on the coal sales. So what we have done in order to mitigate the impact of drop in sales prices, the overall production cost decreased from $47 per tonne to almost $42.2 per tonne, mainly in KPC, we have been able to negotiate the oil price to bring it down as well as we reduce the strip ratio. Next page. So we expect in the year 2025 from KPC. We are looking at 3 -- between 53 to 54 could be a factor of 53.5%. Am could be around 23.5%. That's what we are looking at. So overall, we should be able to touch between 76 million to 78 million prices, it doesn't look much better than what we have realized in the first half. Although we are seeing the global DC news is moving up, but ICA index is far lower compared to the market today. So KPC, we are looking -- overall, the price will be between 60 and 62 million will be between 64 to 66 are opening between 50 million to 52 million. Costs, we are looking at EUR 42 million to EUR 44 million. So KPC between 44 million to 46 million and open between 36 million to 38% million. Although in KPC, we have been able to reduce in the first half, but to continue the production also for this year and next year and coming years, the strip ratio will go up. Just to remind you, the cost doesn't include the royalty and commission, which we are paying to our marketing agents. This is the price movement. You can see GCU at this moment, 110 -- it has been hovering between 110 to 130 now. But because of the situation in Japan, there is a demand from Japan. So as a result, the DC NUC is going up, Australia is also fixing our rough weather, so they're not able to supply the high-grade coal to Japan and Indonesia in putting a good place to fit that cap. Next page. So this is the DC news, as I was mentioned to you, they started moving up since June this year, and we hope that we'll be able to reap the benefit of this increase. Next page. This is the Bumi's operation highlights. So over burden, total in PPC was 218, it is reduced compared to last year. Basically, if you look at it as the strip ratio, which we have reduced to compensate for the drop in prices. Coal sales, it is 24.6, but we hope that we'll be able to reach in KPC almost 54 million tonnes. So 30 million tonnes will be in the second half. In KPC, we are almost touching would be between 14.5 million to 15 million tonnes of sales in the third quarter since the weather is pretty good at this moment. So first half, as I mentioned to you, the FOB price went down $64.9 -- almost $65 compared to $81, almost $16, we got a hit, which was compensated through productivity improvement as well as cost reduction. Inventory, we are carrying almost 2.3 million tonnes compared to last year 2.8 million tonnes. Our rupee Nova burden this year is higher, 71.9%. South Kalimantan weather was better compared to calmand KPC area. So we could have better overburden. Strip ratio was 6.8. Coal mine was better compared to last year. Coal sales was better. Also, there was FOB price of drop of $5 compared to last year. If you look at the combined one, so overall, cover burden has been -- has reduced by 14%. Again, the strip ratio, we had to reduce to compensate for the drop in sales prices. Coal mine combined is 35.9. Coal sales was 34.8. FOB prices combined was 61.3%. Next page -- this third graph of a [indiscernible]. As you see KPC had rainfall higher compared to last year. Arutmin was dry comparatively, but they are experiencing rate for now in the month of August. Normally, is Kalimantan, rainfall is in the first half. South Kalimantan that has a dry climate and then South Kalimantan has rainfall starting from June onwards. And is Kalimantan gets dry class. -- next page Next, -- so OB rebound, as I mentioned, there was a drop, although there has been compared to last year, overall coal mine has dropped a bit compared to last year. Next, so the operational highlights, as I mentioned, the strip compensate for the reduction in FOB prices, we had to reduce the strip ratio also. Next page. See if you look at the Bumi's operation cost, it is -- compared to last year, it has gone down this year as -- but -- although we had a reduction in overall production cost, there should be -- price had gone down substantially this year compared to last year. Next, so the average selling price of -- other than coal, we had $69 compared to $84 last year, a drop of almost $15. -- Eco-coal had a drop of $6. So overall, it was a drop of $14 in first half of 25%. This was compensated through reduction in production costs. Basically, in Arutmin, it was a drop of almost $3. But in KPC, we had a drop of almost $5. So overall, we had a drop of $5, reduction in production costs. Next, so this is the Bumi's financial year, which we have already published after being approved by the Audit Committee. So compared to last year of $93 million, it has come down to 38.6%. If you look at the tax, there's a swing of almost $43 million is basically the deferred tax assets, which was there in the first half of last year. It went down to $9 million. Last year, we had booked 50 million deferred tax assets as a result. We had no tax liability, but this year, it was only $9 million. So there was a swing of almost $41 million tax. On other expenses, -- this year, we had impairment of assets by BRMS almost amounting to $14 million. So basically, this is the main -- also in case of KPC last year, we had $43 million. This year, we had only $13 million, again, because of the drop in FOB price. So the swing almost if you take $30 million is on account of KPC and $14 million impairment came from BRMS. So it's a swing of almost $44 million this year only on account of these 2 factors. That's the math means -- so if you go to the financial highlights, including KPC Arutmin and BRMS. So we will have a net income of $52 million -- so $52 million compared to $134.9 million. Again, as I mentioned, the 2 factors was impairment of $14 million by BRMS by as well as deferred tax assets. Next page. So this is how we reported based on consolidated and current reporting standards. Next page. So this is the EBIT -- we had A EBITDA increase. If you look at, we had an EBITDA increase compared to last year, even though the FOB price went down. So that -- if we see the consolidated EBITDA for the year, we could have much higher EBITDA compared to last year. This is what this graph shows. Next, so if you just consolidate KPC 51% AI 90%, on a 100% basis, we have almost KPC will have $421.7 million, AI will have $83.4 million and $7.7 million on a 100% basis. Next, this is the cash balance we have at this moment. almost in KPC, we are opening together, we have 291. Basically, in KPC, we have in restricted fund of 138.75. This fund comes in the next following the close of the month, we get it in the first week. This is spot CDA we have. Next. So they may come to the Australia coal project. See, we have already mentioned too that we will be making an asset acquisition in Wolform, in Deniseville in Queensland. So the asset includes a 960 kilotonne per annum processing plant, power supply via state grid, tailing dents, on roads, camp water treatment and other key infrastructure. Now we -- at this moment, we are doing the refurbishment of site infrastructure planned prior to restarting operation with commencement expected by June next year. Wolform contract prepares for drilling, geotech and metallurgical tests and plan refurbishment. This has been carried out by Wolform is targeted for 100% acquisition at AUD 63.5 million. If you take it roughly, it will be USD 43, USD 44 million. in U.S. dollars with the bidder statement released and offer closing targeted by 22nd September 2025 million. Wolform also plans to invest $15.7 million [indiscernible] commissioning by June 26, with Bumi committing to support the required fund with this target. Next page. This is the overview of the -- where the project is, it is a privately held company has successfully acquired the Mount Carlton asset. It is situated at 2.5 hour drive from Townsville City in Queensland, which I mentioned to you already. So the key enablers for this is the asset includes a 960-kiloton processing plant power supply, as I mentioned earlier. Refurbishment of site has started, it holds proven reserves and probable results of 8.56 million tonne, containing 237,000 ores of gold as reported in [indiscernible] statement report year 2022 and can be processed to the existing flotation plant. Stable commodity prices, consisting demand growth and accessory uptake channels further enhancing the project attractiveness. So we have not taken any upside whatever we have got in -- at this moment based on our technical data. We have taken this project. But the upside, we will come to know once we really get into. So the transaction date, as I mentioned, we are committed to get this project to be on the ground by June 2026. Next Page. With the key information, if you look at -- so it's an open pit, then the NPV is almost $35.71 million, IRR gives almost $36.60 million. Payback period is 29 months of the first payment. So this is where we are looking at, this is our yearly budget, which we have already prepared and hopefully, we would be able to meet the requirements. If you look at the -- next -- so these are all the maps where the potential of the existing project -- let's go to the next page. Next page, please. This is where we are looking at the upside, but our calculation is based on to this project. These are the key information. Next page and we have already put our people to -- next page, the Board of Directors Wolfom is this. We have put our technical committee already from our side to get this project up. Next page. These are the project images. Next page. Next, Next, then I hand it over to Chris Foil and gas, he will take the ESG part.

So ESG, as of June 2025. Year-to-date, we have allocated and spent just under $2 million, related to roughly 50% of what we normally spend, although we -- last year, we spent closer to $5 million. In total -- sorry, that was consolidated -- CSR projects. In total, we spent $34 million compared to $68 million. Land reclamation is quite straightforward here, KPC 3.94, Arutmin in 177. Trees planted nearly 600,000 plants at KPC and nearly 150,000 plants at Arutmin. Safety performance is in line with our expectations, both at KPC and Arutmin and Azar gas emission standards and reporting. I think it's quite straightforward the numbers there in relation to what you can see in the last 12 months. [indiscernible]

Same as what I mentioned to do earlier. If 1 -- KPC Arutmin -- that's all from our side.

We will move on to the Q&A session. [Operator Instructions]. Maybe I can start with the first question. I think it's interesting on your acquisition plan on the Australia asset. Can you explain a bit more color on the rationale for the acquisition? And also what kind of synergies that Bumi can bring on this asset?

If you recall, Boomi is basically a coal company with KPC, Arutmin and [indiscernible]. So in today's environment, you need to diversify into something where you can make a quick one and the commodity price is also not going down. If you invest in other projects, aluminum and all nickel, the commodity price is pretty low at this moment. So we decided to invest in gold and copper. Gold, this Wolform project, we found that it suits us. We can get into the production next year -- second half of next year. And that will help us to make Bumi, not dependent on cold for 100%, and it gets diversified into getting in other segment street. So that was one of the reasons why we are. And also because of the carbonization impact of coming out of coal, we need to also look at other sectors for decarbonization. So that was mainly the reason behind booming getting into gold and carbon.

And maybe the second, what kind of synergies can you bring to this asset from your expertise in Bumi resources?

See, as you remember, we have BRMS also with us. So we have our people, the technical people we have got from BRMS, and that would help us to to expedite the production at this moment from bringing these people from BRMS. We have recruited some people from because they have experience both in commissioning the plants as well as running the production rate.

Okay. Thank you. If I shift to your existing coal business, -- are you planning to do some more exploration to increase your current reserve or resources?

See, in KPC, we are looking at some reserves and we need the high weight. So that will increase our reserves to almost 145 million tonnes -- there is -- we are in the process of getting the government approval. So hopefully, we should be able to get the approval by next year. So this is almost 145 million tonnes, and there's also a river diversion. In KPC, we are doing it, which will give us almost 7 million tonnes. So roughly 150 million tonnes additional coal we can mine going forward in KPC. And in Arutmin, yes, we are looking at 1 more pit of high-grade coal Yudistira that will help us also. But the quantity is not more than 8 million tonnes. But mainly it will be in KPC, which will have an increase in coal mine going forward.

Okay. But we have a question from a participant. Juan. Is there any production guidance for coal and copper assets for 2026 and 2027. Additionally, is there any cash cost guidance provided for the same period?

See, at this moment, the drilling and all this movement of the refurbishing of all the processing plant is going on. But definitely, maybe in 27 onwards, we will see some uptick in production from Wolform project. So the impact you will see coming forward from '27, not next year.

Okay. And is there any estimated production amount the management is eyeing for about?

See, it will be very small going forward. In 2017, it will be able to increase the production from '28, '29 onwards. But we will try to expedite more from '27 onwards, so because the price is still very good.

Yes. Okay. But -- just wondering, but other than this growth and copper asset that you have -- you are planning to acquire. Is there any other assets that are available in Australia that maybe you're interested in?

Yes. We've talked about this previously. So as part of our transition. We are looking at other assets, and we expect to make further announcements within the next 6 to 12 months. when that will be in that time frame, we're not sure exactly. But there are -- our business development team is working very hard at other assets, and we're looking at other deals. So we'll announce them when it becomes relevant. But we expect to have more gold and copper and minerals assets to be announced in the future.

I see and this was under Bumi resources, but not BRMS.

Yes. So there has been some confusion, I think, on this. And so -- there is a change going on. So firstly, at this stage, we're looking in terms of Bumi Resources. We're looking at near-term assets. whereas BRMS has traditionally looked at and have been involved in exploration and development. So there is a difference. They are busy with what they have on their books whereas Bumi has a different strategy, it needs to diverse away from -- transition away from coal as we move forward. So this is part of the strategy and keeping it within Bumi's space.

Okay. Sure. Another question from Ceaser. Unis bond issuance program up to IDR 5 trillion. Does this bond issuance mostly will be used for asset acquisition program.

Yes. See, at this moment, as I mentioned that this project will be financed through bond issuance. We are in the second phase, and date of book building closure will be on August 12. In September, we'll be able to complete that transaction of Phase 2 Okay.

Thank you, I think last time Bumi has a plan for the quality reorganization right. Can you give some latest updates on that part.

[indiscernible] reorganization has already been done. So whatever the loss was there, carryforward loss year adjusted against the retained earnings. So there is no more carryforward losses in the book, so moving.

Okay. And I think the previous expectation was that Bumi is able to give up dividends after the corporate action. But with the your plan for more asset acquisitions? Is that opportunity still open?