Valuation of an Indonesian Nickel Mine: Nico INA, A Case Study


Authors : Taskia Zahra Amin

Volume/Issue : Volume 7 - 2022, Issue 2 - February

Google Scholar : http://bitly.ws/gu88

Scribd : https://bit.ly/3rOYPaV

DOI : https://doi.org/10.5281/zenodo.6085886

A private Indonesian nickel mine named Nico INA owned by Sangkuriang Mining has been observing their potential to become a player in the global nickel supply. Given a 47 million wet metric tons (wmt) of nickel ore and an additional 160.80 million wmt, Sangkuriang Mining is interested in selling its ownership of Nico INA. This study aims to determine Nico INA’s intrinsic value to arrive at the most appropriate price tag for potential buyers. Internal data on Nico INA’s financial statements, forecasts of global nickel price, total reserves amount, and production volume are used to forecast Nico INA’s free cash flows to equity. The capital asset pricing model serves to determine the most appropriate cost of equity to discount Nico INA’s free cash flows to equity in the discounted cash flow model. The analysis yields an intrinsic equity value range of $306.55 million to 552.81 million. The valuation range depicts that Nico INA’s equity value as 30 to 54 times its book value of 10.30 million. The result of this valuation encourages Sangkuriang Mining to set Nico INA equity value as its price tag and move to sell the asset to obtain high gains on sale.

Keywords : nickel; nickel mining; forecast; risk; valuation; asset value; equity value; price tag.

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