How Antam Generates Cash

Antam’s business model is as solid as it is straight forward. The company makes its money by exploring and discovering mineral deposits, extracting them and processing them as economically and correctly as possible and selling them to long term loyal customers in Europe and Asia. Antam has been doing this profitably since its inception in 1968 and plans to continuing doing this for many years ahead.

If there’s one dependable indication of a company’s financial health, it’s cold, hard cash. Antam generates a lot of cash. In 2004, due to higher commodity prices, Antam’s net cash from operations grew 60% to Rp768 billion or US$86 million. Despite capital expenditures of Rp1,326 billion or US$148 million, Antam’s cash and cash equivalents increased slightly to Rp1,999 billion or US$215 million.

Antam’s main cash generators are nickel ore, ferronickel and gold, which accounted for 42%, 34% and 18% of consolidated net revenues. The nickel division generated operating income of Rp1,118 billion with a 52% operating margin and the gold division generated operating income of Rp161 billion with an operating margin of 31%. Antam’s main cash generation strategy is to sign long term offtake contracts with reliable customers based on spot pricing, sustain growth and improve efficiency.

Supporting Antam’s cash generation are the company’s following recognized strengths:

• Vast reserves and resources
• Low cost producer (ferronickel cost has come up but is expected to decline with FeNi III)
• Strong operating track record
• Long term relationship with key customers
• Prudent financial management
• Prospective strategic alliances