UBS-United Tractors CSPA on a new gold mine；shift away from coal-20250915

UBS: positive impression of new gold mine acquisition

United Tractors (UNTR) announced a conditional sale and purchase agreement (CSPA)with J Resources Nusantara (PSAB) to buy a 100%-stake in a Doup Block gold mineworth US$540m enterprise value (EV). The Doup area covers 4,000ha in Indonesia'sNorth Sulawesi, with 2023-updated JORC-compliant ore reserves of 1.6moz gold and3.1moz resources. Given the PSAB's Doup gold mine plan of 140-150koz (58-63% ofUNTR 2025E gold output), UNTR aims the commissioning of the Doup mine in 2028F.Overall, we are positive on: 1) UNTR's quick shift to the more ESG-friendly gold business,away from the coal; 2) the likely sizeable output contribution; and 3) the fair acquisitionvaluation, including the likely additional capex. Combined with the strong goldfundamentals, we like the acquisition and reiterate our Buy rating on UNTR.

How should we think of the acquisition valuation?

We deem the acquisition overall as fairly valued. 1) The Doup EV suggests US$344/ozEV/reserves and US$174/oz EV/resources. This implies a 26-58% discount to local EV/reserves and a 10-19% discount to local EV/resources. Relative to the global EV/reservesand EV/resources, the valuation is at 65% and 52% discounts, respectively. We think thisis a fair valuation given that UNTR would incur more capex later to optimise the Doupoutput plan. 2) Earlier plan suggested Doup would develop 3mtpa carbon in leach (CIL)gold plant, which we estimate could imply additional US$253m capex. We benchmarkthe capex to EMAS's Pani gold capex of US$633m for 8mtpa CIL. Adding this capex toUNTR's Doup's implied EV/reserves, that would imply a 5% premium/a 38% discount tolocal peers as well as a 49% discount to global peers. This is fairly valued, in our view.