Fitch Affirms GEAR at 'B+'; Outlook Stable

company to maintain its growth trajectory after 2020, reaching close to its target peak production volumes of around 40mt by 2023.

GEMS's production base has grown signi cantly over the last few years, expanding by about 8mt in just 2019 from 22.6mt in 2018. GEMS does not require any signi cant infrastructure enhancement to support its volume growth as its own port is able to support shipping of about 44mt a year. We expect the company to reduce capex to about USD10 million in 2020 (2019: USD23 million) and then increase it to about USD25 million a year starting 2021, mainly to upgrade the capacity of the hauling roads and crushers. Decline in Pro tability: We expect GEMS's EBITDA per tonne to be between USD3.1/tonne and USD3.5/tonne in 2020 based on our price assumptions before rising back to remain between USD4/tonne and USD5/tonne (2019: USD4/tonne, 2018: USD6.8/tonne), over the next three years. The decline in the pro tability is in line with the industry, although this is partially offset by the decline in fuel prices. Consequently, we expect GEMS to have a net debt position starting 2020 through our forecast period, as opposed to a neutral position in 2019. GEMS Limited Mine Diversity: The mine PT Borneo Indobara (BIB) accounts for more than 90% of GEMS's total production and above 65% of the proven and probable (2P) reserves. BIB's production ramp-up plans means the contribution fromGEMS's other mines will remain small. The reserve concentration risk is partly offset by the geographical diversi cation of their reserves, with about 30% of their 2P reserves outside the island of Kalimantan. In terms of operations, we believe the risk is mitigated by its contracts with leading Indonesian mining contractors, such as PT Saptaindra Sejati (a subsidiary of PT Adaro Energy Tbk) and PT Putra Perkasa Abadi. GEMS bene ts from BIB's competitive cost structure, given its low strip ratio of 4x, coupled with short haulage requirements. Long Reserve Life: GEMS has one of the largest reserves compared with its coal- mining peers in Indonesia. GEMS's reserves are the fourth-largest in Indonesia, with proven reserves of around 806mt at end-2019 (end-December 2018: 818mt), or a reserve life of 27 years based on its 2019 total expected production. GEMS's acquisition of the PT Barasentosa Lestari (BSL) mine in the second half of 2018 had further improved its reserve base by adding 150mt of proven reserves. GEMS's BIB mine holds 576mt of the proven reserves, with a second-generation licence valid until 2036.