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
Abstract :
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.
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.
