REVIEW By Alberto Migliucci CEO & Founder of PETRA COMMODITIES

Indonesia’s savviest claim gold as their next big investment

he yellow metal has clearly turned legendary hedge fund manager Stanley gold producer Newmont. The Batu Hijau the corner, becoming flat-out Druckenmiller of Duquesne Capital just mine is located in the southwest region of the bullish following the extensive made a huge bet on gold, going $300 million island of Sumbawa, West Nusa Tenggara and painful correction from long on the yellow stuff. He also took big Province, Indonesia. AugustT 2011 to year-end 2015. Year-to- new positions in Freeport-McMoRan, the “The transaction will directly provide date, the US dollar gold price has increased U.S. miner that operates Grasberg, the a strategic added value to MedcoEnergi circa 26 percent to US$1334 / oz. Petra world’s largest gold mine on the western in view of the world-scale operation of Commodities anticipated back in December half of Papua. Currently, Indonesia produces PTNNT. The acquisition will strengthen last year Forbes Indonesia “GOLDEN around four percent of global gold production MedcoEnergi’s position as an energy and OPPORTUNITY” by Alberto Migliucci (Indonesia is a top 10 gold producer), half natural resources top-tier enterprise in (http://forbesindonesia.com/berita-916- of which originates from the giant Grasberg Indonesia and emphasizes our commitment golden-opportunity.html) that gold would mine which is believed to contain the world’s to contribute to the national development,” turn making the decision of several savvy largest gold reserves (67.4 million ounces). Medco’s President Director and founder investors taking big positions in the precious Indonesia has seen a re-emergence in Hilmi Panigoro said in a statement. metal a smart investment. gold M&A deals with Indonesian tycoons Having worked on the Batu Hijau mine Despite the impressive year-to-date Budi and Michael Hartono and Martua previously, Petra Commodities believes the advance in the gold price, Petra Commodities Sitorus teamed up in a consortium led by Medco acquisition of Batu Hijau is one of continues to believe this is the start of a Australian investment management firm, the best in the market. This is the largest gold larger gold bull run. Positive gold cycles EMR Capital, alongside with Farallon, for the deal in Indonesia in recent years, and may not have historically lasted for at least three to acquisition of the Martabe Gold Mine located be the last. five years, and some longer and the current in North Sumatra from HK-listed company Petra Commodities is presently working alignment of political and economic factors is G-Resources. The Martabe Mine has a on selected gold projects in the archipelago unusually compelling argument for holding reported resource base of 7.4 million ounces in view of unlocking maximum value for its and accumulating gold. of gold and 70 million ounces of silver, and investors. more than 275,000 ounces of gold and over Golden Indonesia 2.2 million ounces of silver were produced Gold as a “safe haven” Indonesia is well positioned to benefit in 2014. In periods of uncertainty, gold is often from any upswing in the price of gold, as it is A further golden opportunity has been one of the few perceived ‘safe-haven’ assets well endowed with world-class gold projects seized by IDX-listed energy firm PT Medco with liquidity. It is also historically negatively spanning from Aceh to Papua. Energi Internasional Tbk with the announced correlated with risk-on assets. Indonesian tycoons Peter Sondakh, acquisition of the Newmont operated Batu UBS claims the sustained argument for Edwin Soeryadjaya, Budi and Michael Hijau copper and gold mine. Batu Hijau is one a gold rally is straightforward and gold has Hartono, and the Panigoro family have all of south east Asia’s largest mines, primarily likely entered the early stages of the next recently established footings in gold assets in producing copper and secondary amounts of bull-run. Key drivers include: the archipelago. gold and silver. Originally discovered in 1990, 1) low/negative real rates, In addition, U.S. billionaire and commercial production began in 2000 by US 2) the view that the dollar has peaked against

58 COAL ASIA JULY 25 - AUGUST 25, 2016 Total worldwide gold ETF ounces held A symbol of wealth and prosperity, it has 90,000,000 been a value for explorers and adventurers Dec. 2012 peak: 84.6 ,ln oz’s 80,000,000 and a lure for conquerors and tycoons, but

70,000,000 the real appeal of gold for any producer, large or small, is that if you mine it, people will 60,000,000 buy it. It can be sold on the spot, the market 50,000,000 is deep and global. The owners of the gold Last: 64,219,664 40,000,000 1Wk Chg: +1,231,872 assets have unmined gold which is effectively gold in an in-situ gold bank. It has value even 30,000,000 Total Tonnes: 1,997 before it is mined and that gold can be used 20,000,000 Oz change since Dec. 2012: -20,396,000 Ton change since Dec. 2012: -637.4 to finance development. 10,000,000 About Petra Commodities 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Petra Commodities, is a boutique Source: Bloomberg investment and advisory firm dedicated to sourcing, investing in and executing the best Developed Market currencies; and ETFs are back natural resources deals in Asia-Pacific, with 3) lingering macro risks. It is reported that global gold holdings offices in Singapore, Jakarta and Sydney. There is a growing belief that fiscal of ETFs have risen greater than 25%, or Petra Commodities was founded by and monetary policies in developed c.380 tonnes to over 2,000 tonnes in 2016 Alberto Migliucci, an experienced investment countries has reached an impasse, and year to date. This is estimated to have banker and qualified geologist with more is all but bust. Governments will never added c.30% to normal monthly global than 25 years’ experience in the mining, oil repay their ever-increasing debt, infact gold demand in year to date 2016. To put and gas and investment banking sectors. may not be able to pay even interest on this increase in perspective, the pace of Migliucci was a senior investment banker, that debt, which explains the rising amount buying in 2016 year to date is equal to Managing Director, Head of Mining & of negative-interest government bonds. about 1000 tonnes of gold on annualized Metals and Energy for Credit Suisse Asia Investors are beginning to look to gold, basis. This would be a record annual amongst others. He also practiced as a fearing that the purchasing power of all total. Furthermore, holdings in bullion- geologist for Renison Goldfields and other paper currency – including the US dollar – backed exchange-traded funds rose to tons mining and energy companies in the Asia- is vanishing. The three-decade low in the recently. That’s larger than gold reserves Pacific region. Petra Commodities combines pound sterling following the Brexit vote held by China, the biggest consumer and financial advisory, geological and technical is a warning that the practice of central- a consistent central-bank buyer in recent expertise, and is able to provide a full suite bank-managed currency exchange rates is months. The latest increase followed the of investment advisory and banking services unravelling. biggest one-day gain since 2009 in the across the life cycle of natural resource The UK’s vote to leave the EU further SPDR Gold Shares, the largest gold ETF. projects and capital investment. underpins gold’s macro narrative, reinforcing Global assets in the funds have surged 37 Migliucci is a regular contributor the themes of further dovish shifts in percent this year and prices are near a two- to Indonesia’s CoalAsia magazine and monetary policies, consequently lower yields, year high as slowing growth, negative rates in FORBES Indonesia. and heightened uncertainty. Europe and Japan, and the likelihood that the For more information please contact These factors justify strategic gold Federal Reserve won’t hike further combined Alberto Migliucci allocations across different types of investors. to boost demand. The U.K.’s vote last month Petra Commodities Pte Ltd In such a world, investors will look to gold to quit the European Union has added further Head Office (Singapore): 1 Scotts Road, and silver. At such a moment it would be impetus to that pro-bullion mix. Gold has Suite 16 – 03: Singapore 228208 counterproductive for investors to dwell upon likely entered the early stages of the next Indonesian Office: Wisma GKBI, Suite 1818, issues of market timing. Gold is extremely bull run, according to UBS Group AG, while Jl J. Sudirman, No 28. Jakarta 10210 under-owned, and therefore likely to react ABN Amro Group NV says prices may hit email: [email protected] | dynamically to even modest inflows. $1,425 this quarter. www.petracommodities.com

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