
Deal focus: EMR spins golden returns from Martabe
EMR Capital has secured a $1.2 billion exit from Indonesia's Martabe gold and silver mine to strategic player United Tractors
United Tractors’ recent purchase of the Martabe gold and silver mine in North Sumatra came as little surprise to Indonesia’s mining industry. As the mining equipment subsidiary of local conglomerate Astra International, itself a division of Jardine Matheson Holdings, the company is always on the lookout for high-quality assets.
“One of the group’s major objectives is to diversify beyond coal into other commodities, which includes gold. And with Martabe being one of the largest gold mines in Indonesia, it was naturally on their map,” says Jason Chang, CEO and managing director at EMR Capital, which acquired the Martabe facility in 2015 as part of a consortium including Farallon Capital and several local investors. “We had run an informal process, and they were one of the parties that reached out to us.”
The enterprise valuation at sale was $1.21 billion, representing a very satisfying exit for EMR and its partners – which paid $775 million for the mine in 2015, including $285 million in equity. The resources-focused GP sees the deal as a validation of the work it has put into the mine over the years.
Martabe entered production in 2012 and was already an attractive asset when the EMR-led consortium acquired it, having produced more than 250,000 ounces of gold and 2.2 million ounces of silver in 2014. EMR believed it could help the mine exploit its proven reserves still further.
“We’ve redesigned the exploration program and invested back in the mine – we’ve brought it from two drill rigs to about 17,” Chang says. “Through our investment in that program we managed to increase the reserve from 2.3 million ounces of gold to 4.7 million ounces as of December 31, 2017, and this year it will increase again.”
EMR’s investments have also allowed Martabe to reduce its all-in sustaining cost (AISC), a measure of all expected production costs over the life of a mine. The AISC was $503 per ounce of gold at the time of acquisition, already well below the industry average, but over the course of the investment it has been lowered still further to $406 per ounce. Combined with a 15% boost in production, this helped grow Martabe’s profits more than threefold.
Investments in accessibility have extended the mine’s projected life as well, and EMR felt that any potential buyer would need to have the proven industry experience and resources to continue to get the most out of the facility and its employees. United Tractors, which combines the capital reserves of a global conglomerate with years of on-the-ground experience in Indonesia’s mining sector, seemed to be a perfect fit.
“Obviously they’re a very large group, and had access to a large funding pool, and that made it interesting for us to talk to them,” says Chang. “We’re confident that they will manage the mine well, and that the mine will continue to flourish and grow under their ownership.”
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