PT Antam (Persero) Tbk

ANTAM's Net Profit Decreases 37% To Rp675 Billion
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Jakarta, April 30th, 2008  - PT ANTAM Tbk (ASX - ATM; IDX - ANTM) announces today its unaudited consolidated net profit decreased 37% to Rp675 billion, and Earnings per Share (EPS) of Rp70.81 for the first quarter of 2008, from the Rp1,073 billion and EPS of Rp112.52 of the same quarter of 2007.

The decrease is mostly due to lower achieved selling prices of ferronickel and lower ferronickel sales volumes, with no increase of nickel ore sales volumes or prices, in combination with a 20% increase to ANTAM's cost of sales due to higher fuel and ore feed prices.  The decrease occurred despite slighter higher ferronickel production volume, signaling a good performance from FeNi III, increased gold and silver sales volumes and higher gold and silver achieved selling prices.  As such ANTAM's net margin contracted to 32% from 45%.

ANTAM's President Director, Mr. Dedi Aditya Sumanagara said:

"While our net income has decreased in the first quarter of 2008, this was not unexpected.  We are pleased FeNi III appears to have stabilized and ferronickel production increased slightly.  As well, we were able to maintain our nickel ore prices despite softening spot prices for nickel throughout the quarter.  Our gold division performed well in terms of revenue growth and prices of gold increased significantly.  We are still optimistic we will achieve our volume targets for this year.  We are also now focused on our next significant growth investment"

Net Sales

ANTAM's consolidated first quarter sales revenues dropped 12% to Rp2,092 billion from Rp2,386 billion, due to lower ferronickel sales volume as well as lower nickel prices. Nickel, including exports of ferronickel and nickel ore, remains ANTAM's biggest sales revenue component, accounting for 72% followed by gold segment which accounted for 27%. The contribution of gold segment increased from a 7% share of sales revenue in the first quarter of 2007, due to stronger sales from trading activities conducted by ANTAM's Logam Mulia unit.  However, while these trading activities boosted revenues, the small operating margins did not generate a similar boost to operating income.  ANTAM remains an export oriented mining and metals company.  In the first quarter of 2008, exports contributed 92% of ANTAM's total net sales. All of ANTAM's nickel products are sold abroad while exports accounted for 73% of the sales from ANTAM gold segment.


In the first quarter of 2008, sales volumes dropped 62% from 3,345 tonnes to 1,267 tonnes of contained nickel in ferronickel and generated Rp325 billion, a 69% decline from the Rp1,063 billion generated in the first quarter of 2007.  The decrease of sales volumes in the first quarter of 2008 was due to ferronickel shipments still in transit to Europe and so were still accounted for as inventories. Total shipments of nickel contained in ferronickel during the March quarter amounted to 5,975 tonnes. However, of that amount 4,708 tonnes departed at the end of March and is expected to arrive in April. ANTAM matches its ferronickel shipments with each customer's request. During the March quarter, ANTAM delivered 1,159 tonnes to a customer in Korea and 108 tonnes to a customer in Japan. Lower sales volumes coupled with a 20% lower average achieved selling price of US$12.69 per pound resulted in a 69% decrease of revenues to Rp325 billion.  Although only reaching 7% of the target, ANTAM remains hopeful to meet its 2008 ferronickel sales target of 17,000 tonnes.

Not related to lower sales volumes during the March quarter, ferronickel production was relatively similar to the first quarter of 2007, as ANTAM produced 4,362 tonnes of contained nickel in ferronickel compared to 4,352 tonnes. With this result, ANTAM reached 26% of the 2008 17,000 tonnes target.  The operation of FeNi III and FeNi II smelters was stable, while  production from the FeNi I smelter was reduced due to a routine maintenance overhaul.  FeNi I, FeNi II and FeNi III produced 752 tonnes, 1,758 tonnes and 1,851 tonnes, respectively. This compares to the same quarter of 2007 when FeNi I, FeNi II and FeNi III produced 1,089 tonnes, 1,565 tonnes and 1,697 tonnes respectively.  The production of FeNi II was above capacity due to higher ore grades and the maximization of the concentrates from the slag treatment plant at the kiln.

To produce 4,362 tonnes ANTAM used 18,094 wmt from its own mines at Pomalaa and Halmahera Island and 276,463 wmt from PT Inco's East Pomalaa deposit. ANTAM has an agreement to source +/- 1 million wmt of ore feed from PT Inco. ANTAM currently is in talks with PT Inco to extend the agreement.

As part of the routine maintenance of its ferronickel smelters, ANTAM switched off the FeNi I smelter on February 19th. ANTAM usually overhauls its smelters every 8-10 years. ANTAM expects the overhaul to be complete in the middle of the second quarter of 2008. Despite the overhaul of FeNi I smelter, ANTAM expects to achieve its 2008 ferronickel production target of 17,000 tonnes. ANTAM last completed a routine overhaul of FeNi I smelter at the beginning of 1999.  In 2005, ANTAM completed an overhaul of FeNi II smelter, which included the installation of a new copper cooling system.  However, the overhaul of FeNi I will not include the installation of a similar system.  After having recently been repaired following a leak that occurred in July of 2007, the operation of FeNi III was stable and ANTAM successfully increased the load of the smelter above 25 megawatts at the end of February. Despite the current load of 30-32 MW, ANTAM could need to lower the power load of the FeNi III smelter to maintain the stability of the plant.  FeNi III has a greater capacity than FeNi II, yet only just outpaced FeNi II due to the low power load and due to the above average output from FeNi II.

Nickel Ore

Beginning in 2008, with regards to the marketing of its ore products, and not the estimation of reserves and resources, ANTAM began to implement a new classification of its nickel ore. Previously, nickel ore known as low grade saprolite ore (LGSO), with a nickel grade between 1.5% and 2%, was included in the classification of saprolite. It is now included in the classification of low grade ore, which also includes limonite ore with grades below 1.5%.  Ore grading above 2% is simply classified as high grade ore.

The new classification has changed ANTAM's annual export targets for 2008.  Rather than 5.8 million wmt of saprolite, ANTAM is now targeting 3.2 million wmt of high grade ore and 2.6 million wmt of low grade ore, or more specifically 2.4 million wmt of LGSO and 0.2 million wmt of limonite.  ANTAM's production target for high grade of 3.65 million wmt is the same as the export target plus and additional 450,000 wmt for ore feed.  ANTAM's production target for low grade is the same as the sales target.

As the reclassification of ANTAM's ore was only applied to ANTAM's 2008 ore output, the only figures that represent an accurate reflection of the company's performance are the production and sales volumes, price and revenues of total combined high grade and low grade nickel ore.  In the first quarter of 2008, ANTAM's total ore production volume increased 33% to 2,313,299 wmt, while ANTAM's total ore sales volume held steady at 2,005,706 wmt. The combined average achieved selling price of all of ANTAM's nickel ore, which is sold free on board (FOB) amounted to US$63.26 per wmt, slightly higher than the US$62.76 per wmt of the same period last year.   Combined nickel ore revenue increased 6% to Rp1,173 billion from Rp1,102 billion.

ANTAM's nickel ore is sold to Japan, Eastern Europe and China, with the high grade generally going to Japan and Eastern Europe and low grade to China. During the first quarter of 2008, 73% of ANTAM's high grade was sold to Japan with the rest sold to Europe.  ANTAM's ore prices are determined according to the spot price on the London Metal Exchange, as well as the grade, moisture content and specified recovery rate.

Due largely to the ore reclassification for 2008 (2007 was not reclassified), whereas ANTAM had no production of low grade in the first quarter of 2007, production of low grade ore amounted to 1,354,770 wmt, including 1,211,895 wmt of LGSO and 142,875 wmt of limonite. For the same reason, production of high grade nickel ore decreased 45% to 958,529 wmt during the first quarter.  ANTAM thus achieved 52% of the low grade production target for 2008 (50% of the LGSO target and 71% of the limonite target) and 26% of the high grade production target.

Combined high grade nickel ore sales amounted to 975,693 wmt, a 51% decrease compared to the first quarter of 2007, due to the reclassification of ore in 2008. For the same reason, consolidated high grade sales revenue decreased 40% to Rp720 billion. Meanwhile, whereas there were no sales in 2007, low grade nickel ore sales of 1,030,013 wmt, including 926,476 wmt of LGSO and 103,537 wmt of limontite, brought in sales revenues of Rp453 billion.  ANTAM achieved 29% of its high grade sales volume target and 40% of its low grade target (39% of the LGSO target and 52% of the limonite target).

Gold and Silver

ANTAM's gold production increased 21% to 935 kg, or 31% of the 2008 target of 2,980 kg. The stronger production was due to higher gold ore production as well as higher gold grades. Gold ore production increased to 105,952 wmt from 99,428 wmt in the first quarter of 2007 while the average gold grade was 10.80 grams per ton (gpt) during the first quarter of 2008 or 15% higher than the 9.38 gpt achieved during the first quarter of 2007.

Gold sales increased by 112% in the first quarter of 2008 to 1,580 kg, or 26% of the 2008 target of 6,000 kg, as Logam Mulia continued its extensive gold trading that began at the beginning of last year. ANTAM's trading activities mostly consist of buying scrap gold and reprocessing it into pure gold bars for sale.  Exports accounted for 75% of gold sales in the March quarter. Logam Mulia's .9999 fine gold products are internationally accredited. Strong sales volumes coupled with a 38% increase in the average achieved selling price of gold of US$901.57 per troy ounce, increased gold revenues by 269% to Rp528 billion compared to Rp143 billion in the first quarter of 2007. However, ANTAM's materials costs also increased significantly related to the higher cost of using gold scrap to produce gold bars.  In the first quarter of 2008, Logam Mulia bought 1,109kg of gold compared to 56kg of gold in the same quarter of 2007. ANTAM made smaller margins on its trading activities than selling gold refined from bullion produced by the Pongkor gold mine.

Sales of silver increased 40% to 7,289 kg supported by the 23% increase in silver production to 7,633 kg. Inline with higher silver sales volume as well as a 33% increase in the average achieved selling price of silver to US$17.81 per troy ounce, revenue from silver amounted to Rp30 billion, a 49% increase compared to the first quarter of 2007. Exports accounted for 69% of total silver sales. Domestic silver sales increased 46% to Rp12 billion while exports increased 124% to Rp26 billion.

Revenue from the precious metals refinery services decreased 15% to Rp6 billion. ANTAM's gold segment, including gold, silver and refinery services, generated Rp575 billion, an increase of 243% from the Rp167 billion in the first quarter of 2007.


Despite a 24% higher average achieved bauxite price of US$20.41 per wmt, revenue from bauxite fell 70% to Rp14 billion. This was due to lower demand for ANTAM's low quality high silica bauxite ore still remaining at the nearly depleted Kijang bauxite mine.  As such, bauxite sales volume decreased 76% to 73,866 wmt, or 5% of the 1.5 million wmt 2008 target. In line with lower demand, ANTAM's bauxite production decreased 59% to 181,141 wmt or 12% of of the 2008 production target of 1.5 million wmt.

Cost of Sales and Production Costs

Despite a decrease in ANTAM's revenue, ANTAM's cost of sales increased 20% to Rp1,061 billion mainly due to significant increases in materials costs, ore mining fees, fuel, depreciation and labour costs.  These top five largest components of ANTAM's cost of sales represented 86% of ANTAM's total production costs.

Materials Used

Materials costs, the largest component of ANTAM's cost of production,  increased  185% to Rp570 billion representing 36% of ANTAM's total cost of production.  The main cause of the increase was a substantial increase in materials costs for ANTAM's Logam Mulia precious metal refining business which increased 2,479% to Rp307 billion and accounted for 54% of ANTAM's overall material costs. This is due to Logam Mulia's increased gold and silver trading activities. In view of the strong demand for refined precious metals, Logam Mulia has been active in purchasing gold and silver scraps from retailers and jewelers and then remelting and refining them to produce refined gold bars.  Logam Mulia purchased 1,109 kg of gold in the first quarter of 2008, up 1,880% from the 56 kg purchased in the first quater of 2007.  Gold and silver inventories also increased 150% to Rp238 billion.

Another substantial component of ANTAM's materials costs was the purchase of nickel ore feedstock for ferronickel production, which increased 45% to Rp200 billion, representing 35% of ANTAM's overall material costs.  Ore was more expensive as ANTAM purchased higher grades than in the first quarter of 2007.  In the first quarter of 2008, ANTAM used 294,557 wmt of high grade ore to produce 4,362 tonnes of nickel in ferronickel, resulting in a lower than normal ratio of 67.5 tonnes of ore for each tonne of contained nickel. About 94% of ANTAM's nickel feedstock was sourced from PT Inco's East Pomalaa deposit. By buying ore from PT Inco, ANTAM preserves its own high grade ore reserves for later development, lowers the cost of ore mining fees and frees up ore extraction capacity in order to increase production of lower quality ore, which ANTAM does not use for its own ferronickel production, for export to China.

In the first quarter of 2008, ANTAM did not undertake toll smelting activities for its ferronickel production.

Other important materials are consumables such as coal and anthracite which are used as reductors in the furnace. Although coal consumption decreased 5% to  25,694 tonnes its price increased 59% to Rp830,000 per tonne which resulted in 20% increase in total coal cost to Rp17 billion. Anthracite consumption increased 31% to 3,191 tonnes while its price remained flat at  Rp1.26 million per tonne, which resulted in 31% increase in total cost to Rp4 billion.

Ore Mining Fees

ANTAM outsources most of its mining activities to third party mining contractors  inline with ANTAM's plan to move downstream, as well as to lower overhead costs, labour costs and pension obligations. While both largely performed by mining contractors, ANTAM classifies the cost of mining of ore for exports as ore mining fees while the cost of mining the ore for feedstock as materials used.

Ore mining fees increased 84% to Rp349 billion in the first quarter of 2008 mainly due to a 33% increase of nickel ore production and 6% increase of nickel ore sales volumes as well as higher operating cost, such as fuel, which are passed on to ANTAM by the mining contractors. Ore mining fees was the second largest component, or 22%, of ANTAM's production cost. Nickel ore mining fees, which amounted to Rp338 billion, was the largest component of ANTAM's ore mining fees and accounted for about 97% of the total.  Bauxite mining fees stood at Rp10 billion or 3% of ANTAM's mining fees while  gold mining fees amounted to Rp1 billion or 0.3% of overall ore mining fees.


Fuel costs,  the third largest component, representing 13% of ANTAM's cost of production, increased 60% to Rp208 billion. This is mainly due to higher international oil prices.  The marine fuel oil (MFO) price increased by 77% to Rp4,708  per litre while industrial diesel oil (IDO)  price increased by 40% to Rp6,625 per litre. About 98% of ANTAM's fuel cost is attributed to ANTAM's energy intensive ferronickel facilities at Pomalaa. In first quarter of 2008, ANTAM used around 37.4 million litres of fuels, of which 91% was the less expensive MFO and 9% was the more expensive IDO. However, although cheaper compared to IDO, MFO is still too expensive and ANTAM's ferronickel cash cost is still above the industry average. ANTAM plans to lower its fuel cost further by converting to less expensive fuels such as natural gas, hydropower or coal.


Depreciation was the fourth largest component, representing 8% of total production costs. Depreciation increased 37% to Rp128 billion mainly due to the depreciation of FeNi III, which began commerical operations in early 2007. About 80% of ANTAM's depreciation is attributed to depreciation at ANTAM's ferronickel facilities in Pomalaa.  Depreciation at ANTAM'gold facilities in Pongkor contributed 19.5% of total depreciation cost.

Labour Cost

Labour cost, which include salaries, wages, bonus and employee benefits, was the fifth largest component of production costs and  increased 18% to Rp122 billion representing 8% of total production costs. Among the largest components of labour costs were the Rp24 billion for bonuses, Rp15 billion for pension health, Rp12 billion for business unit (remote-site) allowances. ANTAM's Pomalaa nickel business unit accounted for 63% or the largest portion of the total labour cost. Pongkor and Kijang accounted for 22% and 8% respectively.

Transportation Cost

While not included as the five largest production costs, transportation cost, which includes costs associated with the shipment of ore, machinery mobilisation, and loading and unloading logistics, is an important component of production costs. Despite higher fuel prices in the first quarter of 2008 and a slight increase in ore export volumes, transportation costs decreased 38% to Rp21 billion.  The decrease is mainly due to lower loading logistics activities. In the first quarter of 2007 ore loading amounted to Rp18 billion and accounted for 53% of transportation cost. Meanwhile in the first quarter of 2008 ore loading amounted to only Rp6 billion and accounted for only 28% of transportation cost.

Gross Profit

ANTAM's gross profit decreased 31% to Rp1,031 billion due to lower revenues and higher cost of sales. As a result, ANTAM's gross profit margin decreased 22% to 49% in the first quarter of 2008 from 63% in the first quarter of 2007.

Operating Expenses and Operating Profits
ANTAM's operating expense  increased 23% to Rp94 billion mainly due to a 39% increase in general and administrative expenses to Rp74 billion.  The largest component of  general and administrative expenses was salaries and other employee benefits, which increased by 52% to Rp36 billion and accounted for about 49% of the total general and administrative expenses. Other expenses, the second largest component of general and administrative expenses, increased 63% to Rp16 billion in the first quarter of 2008.

Exploration expenses and the Tokyo office's selling and marketing activities, the other important components of general and administrative expenses, decreased 10% to Rp19 billion and 44% to Rp1.6 billion respectively.

ANTAM's operating profit decreased by 34% to Rp937 billion, which resulted in a decrease of operating margin to 45% in the first quarter of 2008  from 60% in 2007.

Other Income and Net Income

In the first quarter of 2008 ANTAM booked other income of Rp10 billion, a 91% decrease from Rp108 billion in the first quarter of 2007. This was mainly due to the foreign exchange losses of Rp108 billion in the first quarter of 2008 due to the weakening of the US dollar as opposed to Rp17 billion of foreign exchange gain in the first quarter of 2007. ANTAM also booked less one-off types of income, totalling Rp84 billion compared to Rp98 billion in the first quarter of 2007. The 249% increase of interest income to Rp49 billion, due to higher interest rates, and in particular for ANTAM's Rp3,646 billion of US dollar time deposits and the 34% decrease of interest expense to Rp15 billion due to lower investment loans, could not offset the decrease in other income.

ANTAM's profit before income tax decreased 38% to Rp947 billion and after the deduction of 30% corporate income tax, ANTAM's net income decreased 37% to Rp675 billion. As a result, ANTAM's net margin decreased 29% to 32% in the first quarter of 2008 from 45% in the first quarter of 2007.

Cash Cost and Cost Reduction Program

Similar to other mining and metal companies, ANTAM experienced increases in the cash costs of its products due to among other things higher materials, labour and fuel costs. the provisional ferronickel cash cost increased 37% to US$6.17 per pound mainly due to higher fuel  and ore feed prices while the provisional gold cash cost increased 6% to US$283.09 per troy ounce largely due to higher fuel prices.

ANTAM has taken various measures to lower its costs such as using less expensive but higher quality parts, machinery and equipment and continuously conducting employee training and workforce size reduction to improve efficiency and productivity. ANTAM has also entered into a Power Purchase Agreement with a hydropower producer for the supply of 15 megawatts of electricity (about 15% of its energy requirements) at a competitive price of US$0.0565 per kilowatt hour that will commence in 2009. The next major and most important costs reduction exercise, however, will come when ANTAM converts its main energy source from the more expensive diesel fuel to cheaper alternative sources of energy such as coal, hydropower or gas. Currently, coal is considered as the "front runner" and the most feasible source of cheaper energy for ANTAM's ferronickel smelters. A study on a process called Smart Predictive Line Controller, which would make the use of coal suitable for the high energy needs of ANTAM's ferronickel, is currently underway.

Balance Sheet

ANTAM's financial structure improved as ANTAM's cash and cash equivalents more than doubled while total debt and post-retirement obligations decreased, although accounts payable increased slightly.  Lower debt in combination with a significant increase of total stockholders' equity reduced ANTAM's long term debt to equity (end of period) to 7%.   ANTAM's balance sheet is ready to leverage and make growth investments.

Total Assets

ANTAM's total assets increased Rp3,826 billion, or 47%, to Rp12,004 billion.  The main reason for the increase is the 124% increase of cash and cash equivalents.  Total assets also increased due to an 870% increase of investments in shares of stock and despite a 10% decrease of property, plant and equipment.

Current Assets

ANTAM's current assets increased 80% to Rp7,593 billion due to increased cash.  Cash and cash equivalents increased to Rp4,568 billion due to increased production and higher prices in 2007.  Compared to the end of 2007 ANTAM's cash position decreased 4%, due to a large income tax payment, long term investments and the effect of foreign exchange rate fluctuations.  ANTAM's cash was 80% held in US dollar time deposits and 18% held in US dollar bank accounts, in fourteen domestic and international banks.  The range of annual interest rates on Rupiah time deposits increased to 7.25% - 9.25%, while for US dollar time deposits the range increased to 4.00% - 5.50%.

ANTAM's third party trade receivables net of the Rp1.3 billion allowance for doubtful accounts held steady at Rp831 billion.  Of these, 36% were current and 37% were 31/90 days overdue.  The largest four receivables made up 69% of the account and were owed by ANTAM's agent for ferronickel sales in Europe, Avarus AG, followed by Raznoimport Nickel (UK) Ltd, Zhejiang Grand IMP and Mitsui & Co. Ltd.

ANTAM's net inventories increased 76% to Rp1,845 billion, mostly due to the Rp700 billion of ferronickel shipments in transit to customers.  ANTAM did not have inventories in transit at the end of the first quarter of 2007.  Inventories also increased due to the 153% increase of gold and silver inventories to Rp238 billion, associated with the gold trading activities conducted by Logam Mulia, ANTAM's precious metals refinery.   Nickel ore inventories increased 111% to Rp186 billion, while ferronickel inventories dropped 48% to Rp158 billion.

Non-Current Assets

ANTAM's non-current assets increased 11% to Rp4,411 billion. The increase is due to the nearly ten times increase of investments in shares of stock to Rp485 billion from Rp50 billion.  This account includes investments in PT Nusa Halmahera Minerals, a gold joint venture company ANTAM has with Newcrest Ltd, in PT Cibaliung Sumberdaya, a gold joint venture company owns with Austindo, and in PT Indonesia Chemical Alumina.  In the first quarter of 2008, ANTAM spent Rp430 billion to acquire a 10.72% stake in Herald Resources Ltd, an Australian mineral exploration and development company with which ANTAM has an Indonesian lead and zinc joint venture called PT Dairi Prima Mineral.

Non-current assets also increased due to a 38% increase in deferred exploration and development expenditure to Rp527 billion and the 61% increase of deferred tax payments to Rp330 billion.  These increases offset the 10% decrease of property, plant and equipment to Rp2,935 billion.

Total Liabilities

ANTAM's total liabilities decreased 9% to Rp2,561 billion, due to lower taxes payable, lower debt and lower post-retirement obligations, despite higher other payables and accrued expenses.

Current Liabilities

ANTAM's current liabilities decreased 5% to Rp1,090 billion, due to lower taxes payable which decreased 65% to Rp146 billion.   Meanwhile the increases of current liabilities were not enough to offset the increase to taxes payable.  Other payables increased 576% to Rp115 billion due mostly due to Rp48 billion of cash advances from customers.  ANTAM's accrued expenses increased 23% to Rp494 billion, mostly due to purchases of nickel ore from PT Inco and for mining and transportation services fees.  ANTAM's trade payables increased 21% to Rp93 billion, with the largest amount of Rp26 billion owed to ANTAM's mining services contractor PT Yudhistira Bumi Bhakti.  ANTAM's current maturities of long term investment loans held steady at Rp215 billion.

Non-Current Liabilities

ANTAM's non-current liabilities decreased 12% to Rp1,471 billion.  The decrease is mostly due to a 23% reduction of investment loans, net of current maturities.  ANTAM has two investment loans outstanding.  Net of current maturities, ANTAM owes PT Bank Central Asia Rp409 billion and PT Bank Mandiri Rp277 billion.  Both investment loans had an interest rate of 6.89%.

ANTAM's pension and other post-retirement obligations decreased 7% to Rp655 billion.  The fair value of the pension plan's assets increased at a greater pace than the present value of funded obligations such that obligations for pension benefits dropped to Rp43 billion.   The trend was similar for post-employment medical benefits which saw the fair value of the plan's assets increasing 133%, while the present value of funded obligations decreased 16% to Rp909 billion.  Meanwhile, the liability for other post-retirement benefits, such as past-service benefits, severance and compensation for accumulated unused leave increased 22% to Rp152 billion.

Total Consolidated
Stockholders' Equity

ANTAM's total consolidated stockholders' equity rose 76% to Rp9,442 billion due to the 93% increase in retained earnings to Rp8,461 billion.  This amount was 9% higher than the Rp7,785 billion at the end of 2007.  ANTAM had appropriated Rp2,653 billion of retained earnings, as per the end of 2007.  The significant increase in retained earnings is due to significantly higher net income in 2007 generated by increasing production and higher commodity prices.

Cash Flows

Despite a decreased average achieved selling price for ferronickel and decreased ferronickel and bauxite sales volumes, in combination with flat total nickel ore sales volumes and average achieved total nickel ore selling price, ANTAM was able to increase its first quarter 2008 cash receipts from customers.  This increase was supported by higher volumes and achieved selling prices for gold and silver.  Although a significant increase in income tax payments caused net cash flows provided by operating activities to fall, ANTAM still remained free cash flow positive.  With just Rp49 billion of capital expenditures, ANTAM generated free cash flows of Rp375 billion.

Cash Flows from Operating

ANTAM's cash flows provided by operating activities dropped 65%, or Rp775 billion, to Rp424 billion.  The main reason for the decrease was the 114% larger payments of tax, of Rp1,033 billion, related to ANTAM's substantial 230% net income increase for the year 2007.  ANTAM pays corporate income tax at a rate of 30%.  Throughout the year ANTAM pre-pays income tax on a monthly basis based on forecast annual income.  In the first quarter of the 2008, as ANTAM's actual 2007 annual net income tax far exceeded the forecast, ANTAM was required to make additional tax payments to reconcile the difference.

ANTAM's cash receipts from customers moved in the opposite direction of net sales and increased 20%, or Rp481 billion, to Rp2,941 billion, due to the settlement of large amounts of accounts receivables.  ANTAM's payments to suppliers increased 112% to Rp1,471 billion due to increased purchases of gold by Logam Mulia, to an amount of Rp307 billion, for its gold trading activities, as well as due to higher prices for ore feed and for fuel.  As such, ANTAM's net cash receipts from operating activities decreased 14% to Rp1,422 billion.  Payments to commissioners, directors and employees meanwhile held steady at Rp138 billion. Other receipts increased 411% to Rp91 billion, mostly due to increased cash advances from customers.

Cash Flows from Investing

ANTAM's net cash used in investing activities increased Rp439 billion, or 664%, to Rp505 billion.  The main reason for the increase is the Rp434 billion spent on long term investments, a 311%, or Rp420 billion increase over 2007.  ANTAM's main long term investment was the Rp430 billion spent on the 10.72% stake in Herald Resources Ltd (ASX: HER), a publicly listed Australian exploration and mining company.  ANTAM also spent Rp4.25 billion to acquire an additional 76% in PT Mega Citra Utama, a bauxite exploration company.  ANTAM (20%) and Herald (80%) have a joint venture in Indonesia called PT Dairi Prima Mineral, which will soon develop a large lead zinc project on Sumatra.  Together with its Chinese partner, Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd, ANTAM made a joint takeover bid for Herald, for AUD2.50 per share. ANTAM wants to majority own PT Dairi Prima Mineral, with Zhongjin as the operator, so as to maximize value. Currently ANTAM is still in the midst of its takeover bid.

ANTAM also spent Rp63 billion on exploration and development, an additional Rp34 billion, or 117%, over the first quarter of 2007.  ANTAM increased spending on acquisitions of property, plant and equipment by 40% to Rp49 billion, mostly for land improvements, with Rp20 billion spent at Pongkor and Rp18 billion spent at Pomalaa.

ANTAM's dividend income increased slightly to Rp42 billion, all of which was paid by ANTAM's gold joint venture with Newcrest Ltd, PT Nusa Halmahera Minerals.

Cash Flows from Financing

ANTAM did not generate any cash flows from financing activities during the first quarter of 2008.  This compares with the same quarter of 2007 when ANTAM repaid Rp247 billion of long term borrowings.
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