Sakari

Sakari: Co. believes it is not considered a foreign investor in Indo. Recall last wk that Indo’s president signed a regulation requiring a 51% divestment of IUP/IUPK mining licenses owned by foreign mining companies with 10 yes’ production

Co. does not believe it is affected, as it does not have a PMA ownership structure, and is considered a local investor (PMA is the vehicle through which foreigners are allowed to own mines in Indonesia), and this was cleared with regulators previously (e.g. when a 2009 mining law required foreign investors to sell a 20% stake to locals after 5 years). Hence, Co. does not believe that it is affected by this new regulation.

Overall, Goldman Sachs believe the new divestment regulation may have a negative impact on foreign investment in Indo coal mining. This regulation also follows the recently proposed ban on the export of low-grade coal and increasing difficulties in navigating regulatory hurdles in Indo and believe this could be a potential M&A opportunity for Indonesian coal companies, as foreigners look perhaps to exit this space or look for a local partner.

Note that HRUM, PTBA and ITMG are net cash on their balance sheets, while HRUM and Adaro also have standby debt facilities.