Jakarta. Merdeka Copper Gold (MDKA) is aggressively boosting productivity amidst today’s global challenges as it works on a number of strategic projects.

MDKA’s subsidiaries are currently working on a series of new sources of revenue. This has made the mining giant optimistic about its financial performance.

“Despite the challenges in the global market, we continue to invest in our infrastructure and human capital for better performance. We have invested over $260 million in the first semester of 2023 towards our ongoing projects, including the Tujuh Bukit Copper Project, Pani Gold Project, AIM Project, among others.” Albert Saputro, the president director at Merdeka Copper Gold, said. 

As of the second semester of 2023, the Wetar Copper Mine has started to deliver pyrite ore to the AIM project to prepare for its commissioning. The AIM project is a modern, integrated processing facility in Indonesia Morowali Industrial Park (IMIP) managed by Merdeka Tsingshan Indonesia (MTI), under another Merdeka subsidiary, Merdeka Battery Materials (MBMA).

This project will operate a concentrator to process high-quality waste ore and pyrite ore which comes entirely from the Wetar Copper Mine with a nominal capacity of over 1 million tons per year. MBMA has also started operating an additional rotary kiln electric furnace (RKEF) –Zhao Hui Nickel–with a capacity of 50,000 tons of nickel pig iron (NPI). ZHN is expected to produce between 21,000 and 25,000 tons of NPI in the second semester of 2023. This brings the total capacity of MBMA's three RKEF smelters to 88,000 tons of NPI.

MBMA's subsidiary Sulawesi Cahaya Mineral (SCM) hosts one of the world's largest nickel reserves in a concession spanning 21,100 hectares. SCM'S mine has begun operating this year and has already delivered their nickel ores to RKEF smelter in Indonesia Morowali Industrial Park (IMIP) since August 2023.

Merdeka's expansion is also backed by the company's cash. As of June, their cash stood at $496 million. The company is also actively teaming up with strategic partners.

MDKA via MBMA has also announced a definitive agreement with GEM Co., Ltd in Sep. 2023 to establish a processing facility equipped with high-pressure acid leach (HPAL) technology. It is set to have a capacity of 30,000 tons per year, and will produce nickel MHP as one of the ingredients needed for EV batteries.

MBMA will own 55 percent of the shares in the project under PT ESG New Energy Material, while the remaining 45 percent will go to GEM. The total investment costs for this development are expected to be around $600 million or an investment of around $20,000 per ton.

The company has also been aggressive in its investments in the first semester of this year. For instance, the Tujuh Bukit gold mine which lies in Sumberagung village, Banyuwangi, and is managed by Merdeka Copper Gold’s subsidiary Bumi Suksesindo (BSI). The company is currently working on a project in an underground copper mine.

“We have done the drilling in our underground mine, as well as the development. We expect to complete the feasibility study and construction in the next 3-4 years. Hopefully, we can start the production soon,” Boyke Poerbaya Abidin, the chief of external affairs at Merdeka Copper Gold, said.

After 2026, Tujuh Bukit will shift its focus from gold to copper. Even so, all the minerals in the soil are mixed together. However, a feasibility study is needed to find out whether it is possible to commercialize,

“Our feasibility study shows that in the future, this mine still has potential, namely copper. Gold ends in 2026-2027," Boyke said.

Likewise, General Manager of Operations PT BSI Roelly Franza said the lifespan of the Tujuh Bukit gold mine would be until 2026m according to the budget and cost work plan (RKAB) reported to the Energy Ministry.

According to Merdeka Gold Copper website, the ore content in the Tujuh Bukit underground mine is world-class and can be compared to the Batu Hijau Gold Copper Mine in Sumbawa and the Grasberg Mine in Mimika Regency, Papua. The mine is estimated to be 40 years old.

The underground mine contains mineral resources of 1.71 billion tons of ore grading 0.47 percent copper and 0.50 grams per ton of gold, which contains approximately 8.1 million tons of copper and 27.4 million ounces of gold. This amount includes indicated resources of 442 million tons with 0.60 percent copper and 0.66 grams per ton of gold.

Merdeka Copper Gold has also prioritized sustainability aspects in its operations. 

“We are committed to minimizing our environmental impact and contributing positively to the local communities where the company operates. "This reflects the company's long-term commitment to maintaining sustainability in its business," Roelly said.

The BNI Sekuritas Research Team estimates that the company's NPI cash margin will increase in 3Q 23 and MDKA will make a profit. In 3Q23 the average NPI price increased to $15,600/ton, up from $15,500/ton in 2Q23. In contrast to NPI prices, average LME prices decreased in 3Q23 vs 2Q23.

Based on estimates by the BNI Sekuritas Research team, the average cash margin for NPI could reach $2,100/ton in QTD 3Q23, an increase of 124% QoQ from$933/ton in 2Q23. This is expected to increase MDKA's profitability for 3Q23, even though there is a lower cash margin in its copper business. For the gold business, the BNI Sekuritas Research team anticipates a decline in cash margin in 3Q23, so overall it projects a core net profit of $11 million in 3Q23.