Adaro Energy Pillar

The Adaro Energy pillar comprises operational locations in South Kalimantan, Central Kalimantan, South Sumatra and Australia, with subsidiaries operating in the business segments of mining, mining services, logistics, power, water, land, and capital. This pillar represents the company’s pit-to-power supply chain, with coal pits as the first point of the vertically integrated operations, to power plants as the last point that produces energy, and other supporting businesses in between to make up a complete line of supply chain. 

Each subsidiary along the pit-to-power supply chain has the captive market from the Adaro Group’s extensive operations. Although they prioritize to serve other companies within the group, they act as an independent profit center and can allocate excess capacity to serve the third parties.

Adaro Mining

Adaro Mining is Adaro Energy pillar’s business segment that operates in coal mining businesses. AEI’s main subsidiaries in this segment are PT Adaro Indonesia (AI), which is the largest subsidiary representing 74% of the Adaro Group’s total coal production in 2023, Balangan Coal Companies (Balangan), PT Mustika Indah Permai (MIP), and Kestrel Coal Group. AI, Balangan and MIP produce medium calorific value thermal coal with low pollutant content widely used by coalfired power plants, while Kestrel Mine produces hard coking coal product in Australia.

PT Adaro Indonesia (AI)

PT Adaro Indonesia (AI) runs coal mining operations in South Kalimantan and Central Kalimantan, Indonesia. AI has a Special Mining Business License for the Continuation of Contract/Agreement Operation (IUPK-KOP). The coal reserves in AI’s concession area are of thermal subbituminuous of medium calorific value (CV) between 4,000 kcal/kg and 5,000 kcal/kg GAR, with ultra-low sulphur and low ash contents, making its product trademarked Envirocoal, which has been developed into various categories to meet customers’ demands. As at December 31st, 2023, AI has 634.39 Mt of coal reserves and 3.1 Bt of coal resources.

Since the cessation of Paringin mine operations at the end of October 2022, AI’s coal has been produced from Tutupan and Wara mines, of 625.14 hectares in total area. AI employs three mining contractors, one of which is PT Saptaindra Sejati (SIS), a subsidiary of AEI.

AI’s Operations in 2023

In 2023, AI removed 219.4 million bcm (Mbcm) overburden, or 14% increase y-o-y, resulting in strip ratio (SR) of 4.51x, or higher than the 4.40x target for 2023. Meanwhile, coal production totaled 48.6 Mt, or slightly above the 48 million tonnes target of the year.

Coal Hauling

Coal, after being extracted from the mine, is temporarily stored at the ROM (run of mine). From the ROM, most of the coal will be hauled to AI’s coal processing and barge loading facility in Kelanis, on the Barito River, Central Kalimantan, while the remaining portion of the coal, after being crushed at the Wara crusher plant, is delivered to the power plants of MSW and TPI.

Coal Handling and Processing

AI’s coal handling and barge loading (CPBL) facility consists of seven sets of hoppers & crushers with 10,500 tonnes per hour (tph) total installed capacity, 53 lines of conveyors of 16,500 tonnes per hour (tph) total installed capacity, and two jetties for coal barges. The completed rehabilitation on one of the conveyors has resulted in a new design of much higher capacity to anticipate the capacity increase of one of the hoppers (a coal channel to the conveyor after being unloaded from the trailers).

Coal Blending

To produce coal with customers’ required specifications, AI blends several types of coal using the centralized arrangement and monitoring system (dispatch) during hauling from the mines to CPBL.

Digitalization Program for Operational Activities

For its mining activities from preparation to shipping to be safe, efficient, and productive, AI has carried out a continuous improvement program, whereby digitalization program for operational activities is among the key programs.

AI’s digital transformation is implemented in various systems of core operational activities, in particular the ones related to coal mining and hauling, and in supporting activities essential for ensuring production continuity. The digitalization program is also carried out by the mining contractors for projects within AI’s operations. This program has successfully created lean business processes, facilitated monitoring activities, and minimized human errors, making it effective for maintaining operational excellence.

Mining Safety

AI’s open-cut mining method is relatively safer than underground mining, but mining safety remains an aspect that the company gives the highest priority, to protect workers from mild, moderate, or serious work accidents in all operational activities and processes. In this regard, AI consistently applies AEI’s safety program called Adaro Zero Accident Mindset (AZAM) strictly enforced across the entire Adaro Group to instill and maintain strong safety mindset, behavior, and culture among all workers. AI has also obtained the management system certification of ISO 45001 (previously OHSAS 18001) on Occupational Health and Safety since 2013.

The company’s safety parameters are LTIFR (lost time injury frequency rate) and SR (severity rate), whereas LTIFR represents the number of accidents per one million manhours, while SR represents the number of lost workdays per one million manhours. In 2023, AI recorded LTIFR and SR of 0.03 and 3.92, or down 53% from 0.0730 and down 24% from 5.15 of the previous year, respectively, out of 69,849,632 manhours. Regretfully, the company had two mining accidents leading to serious injuries. For preventive and corrective actions, the Mine Inspector has made recommendations to prevent similar incidents in the future, which the company has implemented together with other necessary actions.

In Good Mining Practice (GMP) Award 2023 of the Ministry of Energy and Mineral Resources, AI received the “Utama” rating for the mining safety aspect, which covers the management of occupational safety, occupational health, and mining safety.

Environmental Management

 Mining impacts: AI continuously monitors and records many components such as wastewater, river water, aquatic biota, genset emission, and ambient air quality, in addition to noise intensity, soil, and biodiversity within mining impact monitoring, and treats mining waste (wastewater and mine mud) properly so that the residue discharged to the environment has fulfilled the quality standards of determined by the government.

Carbon emissions and energy conservation: In compliance with the government regulation to reduce carbon emissions, in 2023, AI used 159,007,587 liters of biodiesel B35 in its operations. AI also implemented various other energy conservation initiatives, among others using solar panels for energy, consuming used lubricant in blasting process, and centralizing power stations for CPBL. Not less important is AI’s reclamation activities, which contribute to the carbon capture and storage in substantial amount.

Biodiversity: The post-mining area in Paringin mine has been used for biodiversity purposes by creating wildlife habitats. The area has been planted with the pioneer plants grouped or clustered based on the species, such as acacia, silk tree, rain tree, eucalyptus, etc., which will eventually form diverse habitats.

In Good Mining Practice (GMP) Award 2023 of the Ministry of Energy and Mineral Resources, AI received the “Aditama” rating for the environmental protection aspect, which covers a wide range of measures for environmental components, such as topsoil and overburden cap rocks, nursery, revegetation and reclamation, and hazardous waste, as well as environmental innovations.

Prestigious Awards in 2023

AI’s operational excellence has been recognized various by reputable institutions, who have awarded AI with many prestigious awards. Among the most notable awards AI received in 2023 are:

• Coal Company with the Best Innovation Program on Subroto Award 2023 category Community Development Program from the Ministry of Energy and Minerals Resources.
• Best of the Best rating in GMP (Good Mining Practice) Award 2023 from the Ministry of Energy and Mineral Resources – as the mining company that earned the highest total score on the five GMP aspects in assessment.
• Gold rating in PROPER Award from the Ministry of Environment and Forestry – the sixth time or five consecutive years AI received this award that represents outstanding and beyond compliance performance in environmental management, added with continuous community development initiatives.

Sustainability Initiatives

Alongside its operations, AI implements various sustainability initiatives to practice responsible mining by applying good mining practices and supporting the government’s ENDC (enhanced nationally determined contribution) commitment. Among the key activities to this end are wastewater treatment into clean water, biodiversity programs at post-mining reclamation area in Paringin and watershed rehabilitation areas, energy conservation program through the use of biodiesel B35, solar energy, pump electrification, and digitalized operations, in addition to community empowerment programs such as stingless bee farming, which has contributed to reducing illegal logging, and Menanti Laburan Ecopark, which incorporates the educational, recreational, and environmental benefits among others.

Balangan Coal Companies

Balangan Coal Companies (BCC) or Balangan comprises PT Semesta Centramas (SCM), PT Laskar Semesta Alam (LSA), and PT Paramitha Cipta Sarana (PCS). AEI, through PT Alam Tri Abadi (ATA), holds 75% equity stake in each company, which separately holds an IUP over a total area of 7,500 ha that covers the Balangan Coal Companies’ deposits. The three coal licenses are an important part of the Adaro Group’s coal mine portfolio due to the additional sources of thermal coal they provide. The coal from these concessions is of a calorific value from 4,200kcal/kg to 4,400kcal/kg (GAR) and similar characteristics to AI’s Envirocoal, with low ash and ultra-low sulphur content of less than 0.1%. Balangan has total estimated coal reserves of 109.8 Mt and coal resources of 249.3 Mt. Balangan is an important part of the Adaro Group’s coal asset portfolio, thus the quality and capacity of its its infrastructure from hauling road, stockpile, office, and warehouse, to its mine water management facilities, must be continuously improved.

BCC concessions produced a total of 8.00 Mt of coal in 2023, or increased 13% from the previous year. Total overburden removal in 2023 was 35.25 Mbcm, or 32% higher than 26.69 Mbcm in 2022, resulting in a strip ratio of 4.41x. Balangan continues to improve the quality of its infrastructure to improve the productivity of its operation. Balangan has also developed various mine planning scenarios to ensure that it can achieve its long-term production target.

PT Mustika Indah Permai (MIP)

MIP is a coal mining subsidiary acquired in 2011 by ATA, which holds 75% equity interest. Its mining license (IUP) consists of a 2,000-hectare coal concession in the Lahat district of South Sumatra, which contains medium energy and ultra-low pollutant subbituminous coal with relatively low sulfur and ash content suited for power generation. MIP’s commercial production began in 2019 and it has developed market presence in both domestic and export market. Although the dry season in 2023 was an obstacle for barging activities, it was favorable for production, supporting the increase in MIP’s production volume. In 2023, MIP produced 4.15 Mt of coal, a 27% increase from 3.28 Mt in 2022, and sold 4.01 Mt of coal, a 52% increase from 2.64 Mt in 2022. MIP’s total overburden removal in 2023 was 13.02 Mbcm, 47% higher than 8.84 Mbcm in 2022, resulting in strip ratio of 3.13x, or 16% higher than in the previous year. MIP has total estimated coal resources of 297 Mt and coal reserves of 203 Mt of a 4,269 kcal/kg (GAR) coal. In terms of sales, MIP fulfilled the DMO requirement in 2023, while its largest export destination was China, followed by India.

PT Bukit Enim Energi (BEE)

BEE is AEI’s second mining asset in South Sumatra. ATA holds a 61.04% equity interest in BEE which holds an IUP that covers an area of approximately 11,130 hectares that contains the coal-bearing Muara Enim formation about 150 kilometers southwest of the provincial capital of Palembang and 50 kilometers east of the MIP concession.

PT Bhakti Energi Persada (BEP)

ATA owns 18.5% stake in PT Bhakti Energi Persada (BEP). BEP owns seven mining subsidiaries which each holds mining license (IUP) that in total cover around 34,000 hectares greenfield mining areas in Muara Wahau district, Kutai Timur, East Kalimantan. Based on JORC the resources of the concession are estimated to be 3.3 Bt, making it one of the largest undeveloped deposits of low CV, low-pollutant thermal coal in the province. BEP’s resources are shallow and amenable to surface mining at extremely low stripping ratios.

In 2023, BEP continued the evaluation of its development options.

Kestrel Mine (Kestrel)

In 2018, AEI through its subsidiary, Adaro Capital Limited, together with EMR Capital acquired interests and assets related to Kestrel Mine. The Kestrel Mine is owned by Kestrel joint venture in which Kestrel Coal Resources Pty Ltd (KCR) owns 80% shares. Following the acquisition, ACL and EMR Capital indirectly own 48% and 52% shares of KCR, respectively. Kestrel is an underground metallurgical coal mine located in Queensland, Australia, and its acquisition marked our first mining venture outside of Indonesia. Kestrel’s acquisition is a significant milestone in our strategic expansion of metallurgical coal portfolio and will strengthen our position in the metallurgical coal market and sustain AEI’s growth over the longer term. Kestrel’s product is an established premium hard coking coal which has low ash and phosphorus content and high fluidity properties, making it a valued component in coke oven feed blends.

In 2023, Kestrel saleable coal production volume was 5.57 Mt, or down 2% from 2022. Meanwhile its coal sales in 2023 was 5.56 Mt, which was 3% lower than 5.76 Mt in 2022. The production and sales volumes were achieved lower than the guidance for the year due to several mining operational challenges. 

The sales of Kestrel’s hard coking coal is made on a contract basis with major customers in the Asian markets. Japan was the largest customer in 2023 followed by India and South Korea. Kestrel is a world-class asset with marketable coal reserves of 175 Mt and resources of 411 Mt as of September 1, 2023.

With high quality metallurgical coal assets in Australia and Indonesia through Kestrel and PT Adaro Minerals Indonesia’s (AMI), Adaro can capture metallurgical coal business opportunities and enhance value creation.