Tycoon-backed Merdeka Gold shares soar on Indonesia’s biggest IPO this year

[JAKARTA] The rally in gold prices, which continue to hit record highs, put plenty of wind in the sails of Indonesian miner Merdeka Gold Resources (MGR) in its market debut on Tuesday (Sep 23) morning, as the company raises funds to expand production.

Shares of MGR opened at 3,600 rupiah on their debut, surging 25 per cent above the offering price. The company is raising 4.66 trillion rupiah (S$359.6 million) in what is Indonesia’s largest initial public offering (IPO) of the year so far.

MGR, a unit of publicly listed Merdeka Copper Gold, offered a total of 1.62 billion shares, or a 10 per cent stake, at 2,880 rupiah apiece – near the upper end of its marketed range of 1,800 rupiah to 3,020 rupiah.

Trimegah Sekuritas, Indo Premier Sekuritas, Sinarmas Sekuritas, OCBC Sekuritas and UOB Kay Hian Sekuritas arranged the IPO.

Investor demand quickly pushed the stock higher on its first day of trading, highlighting investors’ appetite for gold-linked assets as the precious metal continues to set record highs. The sharp gain triggered a temporary trading suspension after the stock hit the upper daily price limit.

“Gold prices remain a significant tailwind for miners such as MGR, and this IPO gives them a chance to tap the market at the right time,” said one Jakarta-based fund manager who wished to remain anonymous.

The listing of MGR provides the company with fresh capital to support expansion plans and reduce leverage.

Part of the proceeds will go towards working capital and debt repayment. Boyke Poerbaya Abidin, president director of MGR, said on Tuesday that the company is developing the Pani Gold Project in Gorontalo, Sulawesi, which is expected to become one of Indonesia’s largest primary gold mines and a key driver of future output.

The mine is designed as a multi-decade operation with processing capacity of up to 19 million tonnes a year.

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With proven reserves exceeding seven million ounces of gold at an average grade of 0.75 g per tonne, the project is expected to deliver an initial annual output of about 145,000 ounces, rising to 500,000 ounces by 2033.

The company’s shareholder base highlights its prominence in Indonesia’s corporate landscape. Its parent, Merdeka Copper Gold, is backed by prominent tycoons including coal baron Garibaldi Thohir, Edwin Soeryadjaya and former tourism minister Sandiaga Uno. Shares of the parent company have surged more than 56 per cent this year.

MGR’s peers include state-owned gold miner Aneka Tambang, as well as Bumi Resources Minerals and J Resources Asia Pasifik.

Analysts say the IPO looks richly valued compared to peers but could be justified if production targets are achieved.

“We view MGR’s IPO as relatively fair if gold prices stay above US$2,600 per ounce and production from the Pani Gold Project reaches 500,000 ounces,” said Oktavianus Audi, an analyst at Kiwoom Sekuritas.

Spot gold hit another record high on Tuesday, reaching US$3,726 per ounce, as markets brace for further rate cuts. The rally has drawn global investors to gold producers and related assets.

Still, risks persist. By the end of 2024, MGR carried a sizeable debt load, with part of the IPO proceeds allocated for repayment. Kiwoom Sekuritas also pointed to related-party transactions, noting that Merdeka Copper Gold will maintain control after the listing – a structure that could pose potential conflicts of interest.

Indonesia has also seen a rise in gold production and demand this year, fuelled by broader geopolitical and economic uncertainty, central bank buying and easing monetary policies. South-east Asia’s largest gold producer is expected to see output surge 60 per cent this year, rising to 160 tonnes from 100 tonnes.

The country also launched its first bullion banks earlier this year, marking a push to strengthen its position in the precious metals market.

MGR’s debut also gave a boost to Indonesia’s IPO market, which had been heading for a second straight year of decline. Since the start of the year, 23 companies have gone public on the Indonesia Stock Exchange, raising more than 15 trillion rupiah. Still, fundraising from new listings remains well below the record levels seen in 2021 and 2022.