Golden Growth
    Category: Riches from Resources By : Gloria Haraito Read : 860 Date : Tuesday, May 05, 2015 - 10:00:55

    Ahmad Zamroni / Forbes Indonesia

    Indonesia is home to several major gold mines, most notably the world’s largest, Grasberg, owned by U.S. mining giant Freeport-McMoRan. Then there’s G-Resources Group Ltd.’s Martabe mine, which last year produced 275,515 ounces of gold and 2.2 million of silver. In comparison, Grasberg produced 1.2 million ounces of gold last year, so Martabe is roughly one-fourth the size of Grasberg.

    Martabe only started production in July 2012, so it has produced gold for less than three years. Yet G-Resources’ Martabe is a gold mine worth watching. Why? It is one of the world’s most efficient gold mines, as well as already smelting its output, thereby avoiding the problems now facing Freeport and others to resolve the smelting issue.

    Martabe has all-in sustaining costs (AISC) of $700 per ounce sold, while the global average cost of gold was $1,150 last year (AISC is a metric from the World Gold Council launched in 2013 to standardize gold production costs worldwide). Given that gold is trading around $1,200 an ounce, it means that many producers are seeing little or no profit. “Compared to our peers, we are one of the most cost efficient operations in the world,” says G-Resources Chief Executive Peter Geoffrey Albert, 56, who has thirty years of mining experience. He notes that his company’s AISC in the first quarter this year dropped to $471.

    Last year, G-Resources, which is listed on the Hong Kong exchange, had revenues of $388 million, up 82% from $213 million last year. Profits were $64.5 million, up 65% from $39 million last year. As Martabe is the only business of G-Resources, the company’s results reflect the mine’s success.   

    According to Peter, Martabe is efficient due to its high quality resources, near the surface so it has a low strip ratio, good recoveries, high silver content as well as relatively simple processing. In addition, the Martabe mine is located close to good infrastructure, such as the airport at Pinangsori, the port at Sibolga and the trans-Sumatran highway. Located in an area of 30 sq-km in Batangtoru subdistrict, North Sumatra, Martabe is established under the Contract of Work (CoW) for 30 years, which covers an area of 1,639 sq-km. The mine currently has resources of 8.05 million ounces of gold and 77 million ounces of silver. It is the first gold mine in Sumatra.

    Regarding the new 2014 rule that requires smelting of resources, G-Resources is already compiling with it, allowing it to export its output. Peter says G-Resources processes its bullion output, called dore, into pure gold and pure silver, using a smelter owned by PT Aneka Tambang. These products are sold in Hong Kong, Korea and Singapore. “Anyone could buy the dore and sell it in the market. But we go to another step, refining it, and we have done that at Martabe,” says Peter.

    This year, Peter hopes to maintain Martabe at the 2014 results or even better. “We will consistently maintain our focus on seeking savings in both operating and capital costs,” says Peter. As a public company, G-Resources’ stock reflects the decline in gold prices. It traded at HK$0.40 in 2012 but lately is at levels of about HK$0.22, giving it a market capitalization of HK$6.1 billion.