Visiting the Geo Energy Resources ($RE4) mines in Indonesia
And a company update.
Disclaimer: The information provided here is for general informational purposes only and should not be considered as investment advice. I am not a financial advisor and do not offer investment recommendations. Before making any investment decision, it is important to conduct your own research and seek the advice of a qualified financial professional.
Geo Energy Resources offered me to visit both their offices in Singapore and their mines in Indonesia a few months ago. Since I was traveling around Asia I thought, why not?
It's easy to forget that behind a company's stock there are people working to make everything run smoothly. This article is mainly about that: my visit to the mines did not change my opinion on the stock, but meeting all the people behind the project and being able to ask them firsthand about what it's like to work for Geo Energy has been a really enriching experience.
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My adventure started with a visit to Geo Energy's offices in Singapore, where I met with the company's CFO, Mr. Adam Tan. We talked for a while about the challenges the company is facing for this year and I also asked him about the CEO change that occurred at the end of last year. Finally, we talked about personal aspects.
I like to talk to local people to get to know the reality of a country, and Singapore was a country that I really enjoyed, so we talked about what it's like to live there.
Interestingly, the offices are literally next door to the Spanish embassy, although I asked them about it and they told me that it was an embassy for commercial purposes, so to speak, and that the real embassy was not that one.
The next day, I had a long journey ahead of me: a flight from Singapore to Jakarta and from Jakarta to Banjarmasin. Upon arriving in Jakarta, the immigration officer looked at me strangely when I told him I was going to Banjarmasin. I was the only foreigner on the flight.
Upon arriving in Banjarmasin, I was greeted by Mr. Ferry, the chief security officer of the TBR mine. Ferry is a mining engineer with extensive experience in the sector: he worked for Freeport for 10 years and has been working for Geo Energy for about 6 years. According to him no investor had visited the mines for about three years.
I spent the night in Banjarmasin, and the next day we left early for the mines, which are about 3 and a half hours from the city. Here's a video of the road.
Once we arrived at the mines, Ferry introduced me to the entire team and they gave me a brief presentation for visitors. As a curiosity, there is no foreigner working in the mines. Geo Energy mainly hires engineers and geologists to plan the mining process, while the rest of the work is subcontracted to BUMA.
Here we have Mr. Ferry showing us the offices.
It should be noted that although all the workers are from Indonesia, the vast majority are from other areas of the country, and they usually work for six weeks straight and then go back home for two weeks to rest. I noticed that there was a very good atmosphere among all the workers, and in the end, it's normal since they are sharing so much time together away from their family, so it seemed like the office people were like a second family to them.
After finishing the presentation, we headed to the mines. For safety reasons, all cars had to carry the stick that you can see in the following video. When driving on the mine's terrain, there is low visibility due to the dust, as you will see later.
Before going I thought that the two Geo Energy mines (TBR and SDJ) were close, but in reality, the 'two' mines are together, literally adjacent, so more than two mines, I would say they are two licenses.
Here they showed me the main seam of the TBR mine, with a height of 18 meters.
The employees had an hour of rest around noon, so all the machines literally stopped and they went to sleep during that time. Another curious aspect is that I visited the mines during Ramadan, so the workers neither ate nor drank anything during the day. It must be tough given the heat working in those mines under the sun.
After seeing the mine up close, we went to the viewpoint, where you can appreciate how big the mine is.
Lastly we went to the port, which is about 10 or 15 minutes from the mine, where they load the coal into barges and then they transfer it to larger ships. In the video, you can also see the way from the mines to the port.
This was everything I visited in the mines. Overall, a very good experience since I had never visited a coal mine. Finally, here are my personal reflections on the visit and my opinion of Geo Energy as a stock.
Personal reflections on the visit
When it comes to investing in a coal company in Indonesia, there are various factors that make people hesitant. Some may be concerned about potential labor exploitation, environmental pollution, or other questionable practices that may be associated with such an investment.
However, the reality I saw was completely different: the workers seemed genuinely happy to work there, proof of that is that most of them had already been working for Geo for a few years. Safety measures appeared to be followed, breaks were given to workers, and on the way to the mines we saw that Geo had built infrastructure like a bridge that was also useful to the local population.
In a way, it's comforting to see that not only shareholders can benefit, but that they were also creating value for the local population and workers. I won't be hypocritical and say that if I had seen otherwise I wouldn't invest in Geo, but after spending two months in Southeast Asia, I have also seen other listed companies that simply contribute the bare minimum and the local population barely benefits from their operations.
On a personal level it was an enriching experience and in a way, I'm proud to have visited them, as I was one of the first investors who wrote about them. It was an original idea that I discovered about two years ago, and since then, it has gained a lot of followers in the Spanish community, with some national investment funds also investing in it.
So I left with the good experience of having visited a coal mine for the first time, of having learned firsthand what it's like to work and live there, and they even allowed me to take a piece of the company, a piece of Indonesian coal that is now with me in the mountains of Andorra.
Geo Energy as a company and as a stock.
At this point, I wanted to make a small reflection: you have to distinguish between liking a company and wanting to invest in it. I think many people are not able to discern between these two concepts and end up 'falling in love' with companies, which I think is a fatal investment mistake.
For me, the stock price is the most important thing when it comes to investing, especially if we are talking about cyclical companies.
That being said, I currently do not have any position in Geo Energy as I said in the last article in March. What's new since then?
On the one hand, ICI4 has remained relatively stable, currently in the $70-73 range.
On the other hand, in the last article, I modeled a production of 10 million tons for 2023. However, I think it is quite unlikely that this figure will be reached, as Geo Energy only has a quota of 8 million tons for this year. Given that there has been no news in this regard, it would be more prudent to think that they will only produce 8 to 9 million tons. This is quite negative because producing fewer tons could make the production cost increase, or at least I don't think they will decrease compared to last year's high costs.
Something else to keep in mind is that Geo Energy has held up very well this year despite the weakness in most coal companies. While Geo has a 4.6% YTD return, other companies such as BTU (-16.4%), Yancoal (-10.5%), Whitehaven Coal (-25.58%), or Thungela Resources (-47.33%) have much lower returns, so on a relative level, I think these other companies may be more attractive.
Similarly, Geo Energy should complete an acquisition this year, possibly in the coming months. I really think that the stock will move based on how accretive the transaction is to stockholders. I personally prefer to stay away for the time being and once the acquisition is made, I will reconsider my position.
That's all for now. If you liked the article, you can subscribe to the blog for free, follow me on Twitter or YouTube, and if you have any questions or doubts, you can leave a comment right here.
Regarding the future of the blog, I will write the articles in both Spanish and English, even though I think I will end up making the videos in English eventually. I plan to publish more articles in the coming months, although I would like to write about original ideas and not rehashes like most of the content I see lately.
In the coming weeks, I will write about Valeura Energy (this is a rehash, but I consider that the analyses I have seen are not complete) and possibly about PBF Energy, a less well-known idea, especially among the Spanish community.
thanks for the write-up, particularly as you currently hold no position.
What's your opinion on GEO's shares after publication of results and lowered interim dividend, at current price of 0.27-0.275 SGD?
Also, did they said to you, that a takeover is already a done deal? Or it was published somewhere? Hope it will be a thermal coal mine also, as I am interested in pure Thermal coal mines, not metcoal or mixed mines ...