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Loading ships off the coast of Pomalaa.
While Antam’s management is keenly focused on growing
revenues and widening profit margins, they are also aware
of the many risks facing the business, some of which are
particular to running a mining business in Indonesia. Mining
is a slow-yielding, capital-intensive business which requires
management not only grow and improve the asset base to
generate better returns but also prudently safeguard the
assets to ensure sustainability. Risk management is an
ongoing and dynamic task and it is one of the areas that
Antam management is improving.
Any good risk management policy must have as its
foundation a deep understanding of the strategic,
operational and financial risks. Below is a list of the risks
that Antam’s management views as important to be aware
of and to, where possible, control.
Risks Relating to Indonesia
Substantially all of Antam’s assets and operations are located
in Indonesia. Antam may be adversely affected by changes
in the Government, Government policies, social instability
or other political, economic, legal, regulatory or international
developments in or affecting Indonesia which are not within
the control of Antam, including those set forth below.
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Political and social risks may affect Antam.
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Changes in the Government and Government policies
may have a direct impact on Antam’s business.
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Terrorist activities in Indonesia could adversely affect
Antam.
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Separatist movements and clashes between religious and
ethnic groups and demands of local governments could
adversely affect Antam.
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Labour activism and unrest could affect Antam’s
customers, suppliers and contractors and Indonesian
companies in general, which in turn could adversely
affect Antam’s business.
Economic risks affecting Antam
- Downgrades of credit ratings of Indonesia and
Indonesian companies could adversely affect Antam.
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The inability or failure of the Government to implement
reforms necessary to receive financial assistance and
loans from multi-lateral agencies and financial
institutions could adversely affect the Indonesian
economy and Antam.
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A slowdown in economic growth or negative growth in
Indonesia could adversely affect Antam.
Risks Relating to Antam’s Business
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Antam’s business is dependent on its ability to obtain,
maintain and renew licences and approvals.
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Antam’s profitability can vary significantly with
fluctuations in the market prices of ferronickel and gold.
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Antam’s revenues are derived primarily from the sale of
ferronickel, nickel ore, gold, silver and other industrial
minerals, for which the selling prices are based on world
metal prices at or near the time of shipment and delivery.
World metal prices for ferronickel and gold have
historically fluctuated widely and are affected by
numerous factors beyond Antam’s control, including:
- the state of the United States economy and the
economies of other industrialised and
developing nations;
- available supplies from mine production and
inventories;
- sales by holders and producers;
- demand for industrial products containing ferronickel
or gold, as the case may be; and
- speculation.
Any material decrease in market prices of ferronickel or
gold would materially and adversely affect Antam’s
results of operations and financial condition.
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Movements in foreign currency exchange rates or interest
rates could negatively affect Antam’s operating results.
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Mining and mineral production may be adversely
affected by a number of risks and hazards that are beyond
the control of Antam.
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In addition to the usual risks encountered in the mining
industry, Antam faces additional risks because its
operations are located on difficult terrain in a very
remote area.
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The mineral resource and ore reserve data compiled by
Antam are only estimates and Antam’s actual production,
revenue and expenditure with respect to its reserves may
differ from such estimates.
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The interpretation and implementation of legislation on
regional governance is uncertain and may adversely
affect Antam’s business.
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Antam’s mining operations create difficult and costly
environmental challenges, and changes in environmental
laws and regulations or their interpretation or
implementation, or unanticipated environmental effects
from Antam’s operations, could require Antam to incur
new or increased costs.
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Completing the FeNi III ferronickel expansion
project and ensuring the project is profitable is an
important challenge.
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Antam’s existing operations and planned investments
require significant capital investment.
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The interests of the controlling shareholder may differ
from those of Antam.
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