Company Presentation CLSA Conference 10-14 September 2012, Hong Kong - - PowerPoint PPT Presentation

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PT Toba Bara Sejahtra Tbk (“Toba”)

Company Presentation

CLSA Conference 10-14 September 2012, Hong Kong

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Disclaimer

These materials have been prepared by PT Toba Bara Sejahtra (the “Company”) and have not been independently verified. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, fairness or completeness of the information presented or contained in these materials. The Company or any of its affiliates, advisers or representatives accepts no liability whatsoever for any loss howsoever arising from any information presented or contained in these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed. These materials contain statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plan,” “will,” “estimates,” “projects,” “intends,” or words

• f similar meaning. Such forward-looking statements are not guarantees of future performance and involve

risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. The Company has no obligation and does not undertake to revise forward-looking statements to reflect future events or circumstances. These materials are for information purposes only and do not constitute or form part of an offer, solicitation

• r invitation of any offer to buy or subscribe for any securities of the Company, in any jurisdiction, nor

should it or any part of it form the basis of, or be relied upon in any connection with, any contract, commitment or investment decision whatsoever. Any decision to purchase or subscribe for any securities

• f the Company should be made after seeking appropriate professional advice.

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Content

Marketing & Financial Highlights 4 1 Corporate Profile & Updates 2 Industry Updates 3 Operational Highlights & Planning CSR & Environmental Highlights 5

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Corporate Profile & Updates

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ABN 66.1% IM 15.7% TMU 18.2%

Toba comprises three coal companies, Adimitra Baratama Nusantara (ABN), Indomining (IM) and Trisensa Mineral Utama (TMU), which hold adjacent concession areas located in East Kalimantan, Indonesia

Toba in Brief

• Substantial and diversified thermal coal

reserves and resources

• JORC-compliant proved and probable reserves of

147 MM tonnes and measured, indicated and inferred resources of 236 MM tonnes

• 4 coal brands with calorific values ranging from

4,700 - 5,800 Kcal / kg GAR

ABN 79.6% IM 15.0% TMU 5.4%

Reserves

%

• Strong growth profile
• Produced 5.2 MM tonnes of coal in 2011 and is forecasted

to produce around 5.7 MM tonnes of coal in 2012

• Prime location provides the operational cost edge to

grow as a logistical & operational center for the area

• Continued exploration effort to increase our Reserves and
• Resources. Current reserves only account for 52% of our

total area has been explored

June 2012 Revenue

%

June 2012 Net Income

%

Resources

%

Total: 147 MM Tonnes Total: US$ 202.7 MM Total: US$ 20 MM Total: 236 MM Tonnes ABN 71% IM 27% TMU 2% ABN 67% IM 33%

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Notes:

• 1. Son of TS founder, Luhut B. Pandjaitan
• 2. Figures are rounded

Toba’s Ownership Structure

• 20-year Production Operation Mining

Permit (“IUPOP”) expiring in December 2029 – IUPOP was converted from a Kuasa Pertambangan (“KP”) in 2009

• IUPOP expiring in June 2013

– IUPOP was converted from a KP in 2010

• In the process of renewing its IUPOP

– Expects to receive renewal of 10-year IUPOP by end 2012

• 13-year IUPOP expiring in December

2023 – IUPOP was converted from a KP in 2010

• 2,990 ha
• 683 ha
• 3,414 ha

License Area

Davit Togar Panjaitan (1) PT Bara Makmur Abadi PT Toba Sejahtra (“TS”) Roby Budi Prakoso PT Sinergi Sukses Utama 73.8% 0.8% 6.2% 5.1%

PT Toba Bumi Energi (“TBE”)

99.99% (2) 99.99% (2) 3.6% ABN Minorities 49.0% 51.0% 99.92% (2) Public 10.5%

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Toba’s Majority Shareholder

Toba believes it benefits from Toba Sejahtra’s experience in the Indonesian coal sector as well as its leadership and experience

Controlling Shareholder with Established Track Record… … Helmed by an Experienced Leader

• A privately owned group founded in 2004 with interests in energy

and plantations

• Its business segments are as follow:

– Energy: Owns 5 coal mining concessions through Toba and PT Kutai Energi. All of TS' mines are characterized by low production costs and favorable proximity to ports – Oil & Gas: In the exploration phase of the 4,567 sq miles South East Madura Block through subsidiary E&P company PT Energi Mineral Langgeng – Power Plant: Operates a 30 MW coal-fired power plant in Palu, Central Sulawesi and is developing a 120 MW greenfield power plant in Senipah, East Kalimantan – Agribusiness: A 25% stake in a 12,000 ha palm oil plantation in East Kalimantan

• General (Ret.) Luhut B. Pandjaitan is the key shareholder and

founder of Toba Sejahtra group. He is currently the chairman of TS

• Mr. Luhut had a long and illustrious career in the civic service

before turning to the commercial sector. Over the course of thirty years in the Army Special Forces, Mr. Luhut rose to become a four- star general – In 1999, Mr. Luhut retired from the military service to serve as Ambassador for the Republic of Indonesia to Singapore – In 2000, he was appointed Minister of Industry and Trade of the Republic of Indonesia

• Thereafter, Mr. Luhut applied his knowledge and leadership skills to

establish TS in 2004, building it from the ground up into a major business group with interests in energy oil and gas, power and agribusiness

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Further integrate ABN, Indomining and TMU to maximize efficiency and cost competitiveness

• Recent restructuring

will align IM and TMU shareholders’ interests and facilitate further integration of

• perations across the

three concessions

• Benchmarking and

sharing of best practices between departments and functions

• Optimize and

coordinate mine planning and logistics

• Centrally coordinate

and streamline corporate finance, legal, human resource and CSR functions

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Increase coal reserve and resource base through additional exploration and potential acquisitions

• Continue exploration

activities to increase proven and probable reserves as only 52%

• f total concession area
• f 7,087 hectares has

been explored to JORC standard

• Consider opportunities

to acquire coal concessions with significant reserves

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Strengthen existing and develop new customer relationships

• Supply a higher

proportion of sales volume to end users, while maintaining relationships with existing coal traders

• Target customers in

Japan, Taiwan, South Korea, China and Hong Kong, South East Asia and India

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Continue to focus on health and safety, environmental track record and commitment to CSR

• Maintain and enhance

high international

• perating standards,

utilize automated mining methods to minimize accidents and enhance safety

• Foster community ties

through development programs as well as job creation

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Organically increase coal production levels

• Expand coal production

through increased production and mine development activities

• Strengthen

relationships with third party mining contractors and work closely with them to improve their productivity

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Toba’s Business Strategies

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Toba’s Initial Public Offering

Listed on IDX 06 July 2012 Number of shares offered 210.681.000 shares or 10.47% IPO Proceed IDR 400,293,900,000 Anchor Investor Barings Private Equity (8% at IPO) Ticker Code TOBA

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Competitive cost producer of coal in Indonesia Substantial reserves and resources to support significant production expansion Solid operating track record and visible earnings growth Well-positioned to capture growth opportunities in thermal coal markets

Why Invest in Toba

Wide range of coal quality grades to meet customers’ requirements Strong relationships with multinational customers Strong sponsorship from established major shareholder

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2007

• IM commenced

production 2011

• TMU commenced

production

• Toba production

hits 5m tons 2008

• ABN commenced

production

• Operational

adjustment due to a drop in coal market 2010

• TS acquired the remaining share

for IM from minority shareholder

• Toba acquired 51.0% of ABN,

52.5% of TBE (IM’s shareholding company) and 51.0% of TMU

• Toba production hits 4m tons

Key Milestones

Strong track record of acquisitions, development of greenfield mines, rapid production ramp-up and experience to adjust operation in a downmarket 2007 2008 2009 2010 2011 2012

2012

• Toba acquired the

minorities’ shares in TBE and TMU

• IPO/Listed on IDX,

6th July 2012 2009

• ABN & IM production

reached 2m tons

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Industry Updates

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Price of Newcastle Index Price dropped in Q2…

80 110 140

Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

$/ton

Impact of Global Economy Coal Industry

… due to the concerns over global economic slowdown

IMF GDP Forecast for 2012 Sep 2011 (Updated) Apr 2012 (Updated)

1.8% 2.1% 1.4% 0.0% 9.0% 8.2% 2.3% 2.0% 7.5% 6.9%

• The Newcastle Thermal Coal Price Index went from

US$108.88 in April 2012 to US$101.21 in May 2012. Then to US$91.73 in June 2012.

• The Index Price are typically used as a basis for Spot

and Index Linked Long Term contract sales, before discounts

Source: World Bank Source: IMF

• Concerns regarding the instability over Greece, Spain,

and the EU were highlighted given the surprise of Greece election result

• European countries are the biggest trading partner for

China

• The US economy, even though improving, used cheap

shale gas for electricity

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However, thermal seaborne coal price may have seen the floor…

Response by the Coal Industry

… as the price of imported coal became cheaper than domestic coal in China... … and coal producers limits production growth..

“ITMG lowers coal production target in 2012” – Kontan, Aug 24, 2012 “Indonesia Adaro cuts 2012 Thermal coal output target to 48-51 million mt” – Platts, Aug 1, 2012 “Output cuts help steady China’s coal prices, outlook” – Reuters & Mining Weekly, Aug 29, 2012

80 110 140

Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12

$/ton

Source:Globalcoal Source: CLSA Asia-Pacific Market, CEIC, CCTD, globalCoal

• 100
• 75
• 50
• 25

25 50 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 (US$/tonne) Export

Import

Spread (Domestic -…

Toba remains profitable and set to grow given the price support in the market, despite the subdued global economic condition

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Operational Highlights & Planning

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2.0 3.9 5.2 2.5 3.2

2009 2010 2011 2012

Actual Est

Production Historical

MM Tonnes

Consolidated Production Performance

Samarinda Mahakam River ABN Jetty Muara Jawa Muara Berau Makassar Strait Major City Jetty Transshipment Point IM Jetty NDM Jetty Kutai Energi Jetty IM ABN

17km 4km 5km

~55 Km (total ~120 Km) ~65 Km

kilometers 12 24 36 48

Kutai Energy

17km

TMU

Operation Focus for 2012 – 2013

• Integrate the operation of all 3 assets that are

adjacent to each other to maximize profitability

• Update mineplans to focus on profitability

growth over volume growth given the current price of coal

Result of H1 2012

• Despite challenging condition, we maintained
• ur profitability because our prime location

gives us our operational cost advantage

• This advantage provides an investment

margin of safety to our investors

• Prior experience from 2007 in a similarly

difficult market gives us the experience to adjust our operations

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774 768 1,138 1,077 884 1,078

• 200

400 600 800 1,000 1,200

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Production & Stripping Ratio

Thousand Tonnes

ABN Operational Update

Major Quarterly Updates

• 1. The production level is higher compared to H1 2011

but is behind the expected target due to higher SR, and higher rainfall delay compared to plan

• 2. ABN have been making adjustment to its mineplan to

lower its SR

11.1x 16.8x 13.9x 14.3x 17.6x 17.1x

• F

5.0x 10.0x 15.0x 20.0x

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

ABN

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ABN Operational Advantages and Focus

Barge Loading Jetty Under Pass Coal Hauling

Short coal hauling distance 4km

Crusher Capacity

High Built Cap 10 MM TPY Loading Speed of 1,800 TPH Capitalizing on Infra Strength

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IM Operational Update

Major Quarterly Updates

• 1. IM Operations was impacted from higher mining SR

and lower level of equipment productivity from contractor

• 2. IM have worked on reducing the SR and began

negotiation with the contractor to improve equipment productivity

291 394 378 347 161 236

• 50

100 150 200 250 300 350 400 450 500

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Production & Stripping Ratio

Thousand Tonnes

10.1x 8.6x 8.8x 8.1x 16.4x 14.5x

• F

2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

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IM Operational Advantage and Focus

Coal Hauling Overland Conveyor Crusher Capacity

Short coal hauling distance < 5km CPP Ramp up to 6MM TPY Conveyor for TMU & Others

Joint Operation

Integrate Mining with ABN

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TMU Operational Update

Major Quarterly Updates

• 1. Mining performance was lower as the slippery road

condition due to high level of rainfall and higher stripping ratio

• 2. Adjustment to the mineplan was made that would

lower the mining SR

39 23 59

• 20

40 60 80 100 120

4Q11 1Q12 2Q12 Production & Stripping Ratio

Thousand Tonnes

24.5x 45.5x 14.4x

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x 50.0x

4Q11 1Q12 2Q12

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TMU Operational Advantage and Focus

Hauling Road

Build 16km Road to ABN

Samarinda Mahakam River Muara Jawa Muara Berau Makassar Strait Major City Jetty Transshipment Point Kutai Energi Jetty IM ABN ~55 Km (total ~120 Km) ~65 Km

kilometers 0 12 24 36 48

T M U

Develop clients for Infrastructure

Exploration

Exploration in 2500+ ha

Exploration

Integrate CPP Ops with IM

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Marketing & Financial Highlights

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Toba’s has a wide range of coal products…

TM Ash TS Calorific Value (kcal/kg) (% GAR) (% GAD) (% GAD) GAR GAD ABN ABN 52 25 7 0.8 5,200 5,800 ABN 58 19 6 0.8 5,800 6,250 IM Indomining 19 8 0.9 5,700 6,200 TMU Trisensa- 47 28 5 0.4 4,700 5,400 Coal Products

Marketing Highlight

Location of End Users

HONG KONG MALAYSIA TAIWAN JAPAN SINGAPORE SOUTH KOREA CHINA INDIA INDONESIA THAILAND

… that continue to be in demand in the major export markets in the region

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Marketing Highlight

Major Customers DRAGON ENERGY GROUP

Major customers provide the stable business support for Toba’s marketing… …at zero external cost because Toba handles our marketing internally

Toba’s Marketing Operations

 Central Marketing Operations of all 3 subsidiaries  Internally developed customer based that allows Toba to have low marketing cost  Balance mix of long term contract, short term and spot  Active participation in reputable conference and trade shows to promote the Toba brand  Marketing development to sell directly to end users

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481 274 101 2009 2010 2011

Notes:

• 1. USD/IDR exchange rate of 1:9,400, 8,991 and 9,068 as of December 31, 2009, 2010 and 2011, respectively (Source: Bank Indonesia)
• 2. EBITDA equals gross profit less general and administrative expenses and selling expenses plus depreciation and amortization
• 3. CAGRs calculated based on financials which are reported in IDR
• 4. Includes net income attributable to minority interest

TBS has achieved significant revenue and earnings growth driven by strong growth in production and ASP combined with its competitive cost position

Revenue(1)

US$ MM

EBITDA(1)(2) and Margin

US$ MM

Net Income(1)(4) and Margin

US$ MM

13 81 160 13% 33% 30% 2009 2010 2011 10 58 114 10% 21% 24% 2009 2010 2011

Toba Financial Summary – Key Financials

The Company's audited financial statements are presented in Indonesian Rupiah. The Company has not historically prepared U.S. dollar financial statements but has begin to prepare U. S. Dollar financial statements in 2012. The Company is currently considering and may transition to using the U.S. dollar as its reporting currency. Solely for the convenience of the reader, this presentation contains translations of certain Indonesian Rupiah amounts into U.S. dollars at the following rates as of and for the periods specified, being the middle exchange rate announced by Bank Indonesian of 1:9,400 with respect to financial information as of and for the year ended December 31, 2009; 1:8,991 with respect to financial information as of and for the year ended December 31, 2010; 1:9,068 with respect to financial information as of and for the year ended December 31, 2011; and 1:9,180 with respect to financial information as of and for the quarter ended March 31, 2012. Such translations should not be construed as representations that the Indonesian Rupiah or U.S. dollar amounts referred to could have been, or could be converted into Rupiah or U.S. dollars, as the case may be at that or any other rate or at all. The reader should not place undue reliance on these translated amounts, which are unaudited.

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Toba Financial Summary – Key Financials (June)

Revenue

US$ MM

Net Income

US$ MM

EBITDA

US$ MM

• Toba’s strengths in operation was proven as revenue continue to grow. This is further highlighted given

the subdued market condition

• Improvement and adjustments actions are being taken to return future EBITDA and Net Income to the

similar previous level

66 26 H1 2011 H1 2012

44 19 H1 2011 H1 2012 194 203 H1 2011 H1 2012

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Revenue Drivers

ASP Drivers

Pricing Mechanism: Index-linked vs. Spot Contract Type: Long-term vs. Short-term vs. Spot Coal Quality Export vs. Domestic Mix Premium vs. High-growth Markets Customer Type: End-users vs. Coal-traders Toba

Historical ASPs

US$ / Tonne

50,1 65,5 93,9 2009 2010 2011 95,0 82,0 H12011 H12012

Benefit from lower discount to Newcastle Thermal Coal Index compared to other similar quality coal

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Cash Margins (1)

US$ / Tonne

TBS ABN Indomining 40.4 40.6 47.7 54.6 30.6 14.7 102.2 71.3 55.2 2009 2010 2011 35.8 40.2 56.5 33.7 23.3 10.6 90.2 63.6 46.3 2009 2010 2011 FOB Cash Cost Margin ASP 37.7 40.3 54.2 39.7 25.2 12.4 93.9 65.5 50.1 2009 2010 2011

Note:

• 1. Cash margin equals ASP minus FOB cash cost including royalties

Historical Cash Margin

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Cash Cost Analysis and Drivers

Toba FOB Vessel Cash Cost (1)

%

Toba FOB Vessel Cash Cost per Tonne

US$ / Tonne Sold

2009 2010 2011 H1 2012 2009 – H1 2012 OB Removal 23.2 25.7 38.6 43.4 +20.2 Barging & Floating Crane 7.4 5.0 5.7 5.7 (1.7) Royalty 3.2 4.0 6.0 4.8 +1.6 Coal Extraction & Hauling 1.5 2.8 2.3 2.8 +1.3 Fuel 0.3 0.4 1.1 2.9 +2.6 Other 2.1 2.4 0.4 7.3 +5.2 Total 37.7 40.3 54.2 66.8 29.1

OB Removal 65% Barging & Floating Crane 9% Royalty 7% Coal Extraction & Hauling 4% Fuel 4% Other 11%

Cost Management

 Lower Production SR & Contractor rate  Increase Integration to lower Hauling, Crushing, and Barging  Lower Marketing cost through centralize marketing

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CSR & Environmental Highlights

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• Toba is continuously developing and implementing its corporate social responsibility programs

– Creating educational opportunities for local communities including renovating schools, training teachers, providing post-graduate educational assistance and creating a literacy program for adults and a scholarship program for school-aged children – Providing health services to the local communities – Helping groups of farmers plant crops of vegetables and bamboo and assisting with land rehabilitation – Creating local employment opportunities by sourcing some of the Company’s site workforce from the neighboring areas

Helping Farmers Plant Crops Creating Educational Opportunities Providing Health Services

Toba is Committed to Being a Responsible Corporate Citizen

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Awards

Ernst & Young Social Entrepreneur of the Year 2011 East Kalimantan Green Proper Mining Award ABN East Kalimantan Blue Proper Mining Award Indomining