by Etrading Securities
News on exploitation permit. According to the BRMS management, it has received word that the permission to borrow wear exploitation (principle) has been signed by the government (EMR). However BRMS itself has not received an official statement permit. Permits are expected to be formally accepted by the BRMS before the end of November 2011.
Review from the Forestry Ministry. After obtaining permission of exploitation, the Department of Forestry will conduct a review during the first 2 years to ensure the permit is used according to the company's plan. If the review goes well, then the company will earn the right to mine at that location for 20 years.
What's next? When BRMS received permission to borrow wear exploitation (principle), then the process of underground mining at Dairi project can be started with an estimated 18 months to production. Initial production is targeted in 2013 from the Black Dog as much as 115 thousand tons for zinc and 60 thousand tons for Lead. Based on our estimates, the contribution of the Dairi revenues in 2013 amounted to Rp3.5 trillion (81% of total revenue).
Production from Mauritania. In addition to the Dairi project, BRMS will also start production of DSO iron ore from Mauritania in 2012 with initial production target of 600 thousand tonnes of DSO iron ore until 2013. After 2013, production from Mauritania expected to reach 1.2 million tons / year. We estimate the contribution of revenues in 2012 amounting to Rp645 billion (80% of total revenue) and Rp659 billion (15% of total revenue) in 2013.
Action & Recommendation. Currently we are still waiting for 9M11 financial reports and official statements from the company regarding the exploitation permit (principles) for the Dairi project. So we maintain our TP and recommendations for the progress of the Dairi and Mauritania have been factored in our model calculations. We see the BRMS positive outlook in the future because we believe the exploitation permit is only a matter of time. Maintain BUY