Merdeka Copper Gold (MDKA IJ)
4Q24 operational improved, though FY25 might be another challenging year
- Despite positive yoy growth in FY24, we expect gold and copper production to diminish in FY25 as the life of mine comes to an end.
- The Pani gold project is key towards the continuation of revenue for MDKA.
- We adjusted our FY24-26F earnings forecasts by +89%/-41%/-20% and TP to Rp2,400; reiterate Buy rating on upsides from growth projects.
Gold segment supported by price, burdened by depleting mine
In 4Q24, MDKA’s gold revenue grew +17% qoq to c.US$84mn, driving FY24 revenue to c.US$272mn, +3% yoy. The main contributor to the segment was the robust gold ASP that reached new highs in 4Q24 at US$2,672/Oz, +11% qoq, and averaged US$2,371/Oz in FY24, +22% yoy. Meanwhile, sales volume slowed to 108.5k Oz in FY24, -17% yoy, and cash cost grew by +21% yoy in FY24. Due to a stronger ASP hike, the cash margin managed to expand to US$1,697/Oz in 4Q24 and US$1,354/Oz in FY24. However, FY25’s guidance might indicate a weaker outlook as production is set at 100-110k Oz, -5% to -13% lower than FY24A, while cash cost/AISC is projected to grow by +18%/+27%. Thus, we expect TB Gold’s revenue contribution to diminish from c.12% in FY24 to c.9% in FY25.
Wetar mine will soon end mining operation
4Q24 Copper sales decreased -38% qoq to 3.1kt due to a high base in 3Q24 from carryover sales. However, cash cost decreased noticeably by -54% qoq, caused by higher mining activity with a higher ore grade of 1.7% (vs. 1.4% in 3Q24), which brought its cash margin to US$5.6k/Oz. In 3Q25, Wetar will cease its mining activity, though leaching and recovery will continue until 1Q27, as it nears the end of its mine life. Thus, FY25 production guidance fell to 11-13kt, with lower cash cost/AISC of US$3.5-4.4k/t and US$5.3-6.2k/t, -24%/-21% yoy. We estimate its revenue contribution will also fall from c.6% in FY24 to c.4% in FY25.
Future project updates are key to sustainability
By the end of FY24, the Pani gold project was 33% complete and is expected to begin production in early FY26, just in time for a transition from TB Gold and Wetar’s declining output. The latest resource update was released in Mar24, with contained gold of 6.9Moz. However, another update is due in 1Q25 that will detail both its resource and reserve. On the other hand, the TB Copper project will also release an updated PFS in 2Q25, which includes plans for open-pit mining, a substantially larger ore reserve, and higher SLC throughput.
Maintain Buy rating with a lower TP of Rp2,400
We adjusted our FY24-26F earnings estimates by +89%/-41%/-20% as we lower our assumptions based on FY25 guidance and included discounts on growth projects. We maintain our Buy rating on valuation upsides from key growth projects. Key risks include a higher cash cost, lower ASP, and project delays.
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