New way to tap into the copper industry. We believe that AMMN will be among the ‘Ones to Watch’ stocks in the Indonesian stock market, easily capturing investors’ attention, as it will provide them with a new way to tap into the copper industry. At the moment, the copper industry’s presence in the Indonesian stock market is rather limited, with MDKA as AMMN’s only Indonesian copper peers  (through its Wetar and Tujuh Bukit mines; where Tujuh Bukit mine is expected to commence production activities in 2026).

Strong long-term outlook. We believe the global copper supply won’t see any significant growth in the long run, mainly due to 1) depleted reserves, and 2) lower ore grade. In addition, lower capital spending for exploration, permit problems, lack of financing, weather disruptions, changes in political landscape, and ramp-up delays in large projects worldwide might hamper production activities. Meanwhile, we expect demand for copper to experience robust growth as the world transitions from fossil fuel to renewable energy (please note that renewable energy tech uses 2-8x more copper than fossil fuel tech). The potential imbalance between supply and demand, which might lead to price surges, boosts our optimism about the long-term prospects of copper players.

Abundant reserve with low C1 cash cost. AMMN owns one of the world’s largest producing copper mines (the 2nd biggest in Indonesia after Freeport’s Grasberg mine). In addition, according to Wood Mackenzie, AMMN runs its copper-gold mines at a negative C1 cash cost of USD 1.28/lb in 2023F, putting AMMN in the bottom quartile of its C1 cash cost list. We believe this fact will give AMMN an advantage over other copper players, as we expect oversupply issues to affect global copper prices in the mid-term.

Become a fully integrated copper player. AMMN is currently building its own smelter and precious metals refinery, with an estimated input capacity of 900kt of copper concentrate per annum, and is expected to be fully commissioned by the end of 2024F. The smelter will provide massive support to AMMN’s operations, especially with the copper concentrate export ban that will become effective starting from June 1, 2024. The smelter will enable AMMN to process its copper concentrate into copper cathodes, gold and silver bullions, and other by-products, giving its products more added value.

HOLD, TP IDR 5,500. We initiate our coverage on AMMN with a HOLD rating and a SOTP-based TP of IDR 5,500 per share, implying 27.4x 2024F P/E. Several factors convince us that AMMN is an attractive investment option, including 1) it is the only pure proxy-to-copper player listed on the IDX and 2) its strong long-term outlook. However, it should be noted that AMMN’s share price has soared by 224.5% since its IPO, indicating limited upside to our target price, hence our HOLD rating. Upside/downside: higher/lower-than-expected commodity prices, regulatory changes.