Initiating BUY on BRMS as we are bullish on gold

We initiate coverage on BRMS with TP of IDR 750/sh (51.8% upside), valuing the Company using Sum of The Parts (SOTP) based valuation. Our TP pricing for BRMS: 2026F P/E and EV/EBITDA of 56.1X and 35.4x, respectively. Looking forward, our TP pricing for BRMS 2029F P/E and EV/EBITDA is 12.6x and 7.8x, respectively.
We are bullish on gold, and expect its price to average around USD 3,350/oz this year, then in 2026F USD 4,000/oz, and USD 4,200/oz from 2027F onwards. Our conviction for setting such a gold price stems from:
1.         Limited supply and major gold strikes increasingly unlikely, with extraction costly
2.        Interest rate cut, real yield falling, concern about future inflation
3.        Geopolitical and fiscal risks are unfortunately here to stay
4.       Concerns about economic policy
5.        Central Bank and ETF gold purchases driving up the price

BRMS, through its CPM project, is the best proxy to invest in in a steep gold price environment
We thus appraise BRMS as the best proxy to ride, in this bullish gold sector scenario, as 100% of its revenue derives from gold and silver, thus making BRMS a pure play gold mining company yielding high-grade gold ore (4.5-5.0g/t vs. surface 0.79-1.7g/t)). With the relentless rise in gold price, BRMS will likely enjoy margin expansion ahead. BRMS is very well-positioned to monetize rising gold price, with its robust production growth profile, supported by its high-grade gold assets, once underground mining gets underway. We view BRMS as on track to expand its business massively by 2029F; gold sales should pop by 3.9X to 276.6Koz. 4.8X revenue growth to USD1.2bn. EBITDA to grow 6.2X to USD711.7mn. Net profit up 6.6X to USD497.8mn.

GM project will allow BRMS to diversify its revenue in the future, incorporating copper
Gorontalo Minerals (GM) is currently planning to launch a massive drilling campaign, to explore copper deposit potential. Expect a positive announcement on a copper discovery by the end of this year. However, a more ideal timeline to announce the JORC of this discovery would be end-2026F. This exploration are essentials for BRMS to decide the mining plan, supporting facilities, etc. for its future copper production.

Since this project will require funding to cover the CAPEX for developing the mine, BRMS have decided to invest in a 500tpa heap leach plant for their GM project in Motombo, in order to extract gold from the deposit, thus surging cash flow to project level, which will support future GM funding. Our calculation projects this new heap leach plant to bring an additional ~1.25Koz of gold production volume, and USD6mn revenue per year, to keep BRMS in a steady state, a figure considered insignificant compared to total consolidated production and revenue. At this juncture, we have not yet incorporated any GM production forecast into our calculations.

Execution is key
In March 2022, Mr. Agoes Projosasmito, an executive with more than 15 years of mining experience and a proven track record in Amman Mineral International, was appointed CEO of BRMS. Since then, gold production has grown by 12X, from just 5.4Koz in 2022 to 64.9Koz in 2024. A solid track record in raising production and reserves are important for future asset monetization.

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