Giant dump trucks lined up in readiness for despatch to their next load at the Tutupan pit. Orderliness and precision are equally critical in Adaro Indonesia’s physical mining operations.
PT Adaro Indonesia
PT Adaro Indonesia (AI) is currently Adaro Group’s largest coal mining operation from which we produce our flagship Envirocoal product. AI’s concession is in South Kalimantan and it operates under a CCA with the Government of Indonesia. Within its concession, AI has three pits, Tutupan, Paringin and Wara. From these pits, AI produces sub-bituminous, medium heat value coal of between 4,000kcal/kg and 5,000 kcal/kg GAR . AI’s coal has distinct low-pollutant contents and therefore branded as Envirocoal.
In 2016, AI produced 50.77 million tonnes (Mt) of coal, or relatively flat year-on-year, and sold 52.85 Mt, a 3% increase from 2015. Overburden removal at AI’s pits declined 12% y-o-y to 229.30 million bank cubic meter (Mbcm), resulting in a strip ratio of 4.52x.
AI expanded its product portfolio to include Envirocoal 4200 (E4200), which has created a new market in the lower heat value coal category. AI sold 4.10 Mt of the E4200 in 2016 and this product was well received in China and India. AI’s sales of 52.85 Mt in 2016 contributed approximately 90% of AE’s revenue.
In line with our strategic intent to manage coal reserves for the long-term, AI plans to maintain flat coal production in the coming years. Further, as Indonesia’s demand grows along with the operations of new coal-fired power plants, we are committed to taking part in, and prioritizing, the domestic market.
Balangan Coal Companies
PT Semesta Centramas (SCM), PT Laskar Semesta Alam (LSA) and PT Paramitha Cipta Sarana (PCS) (Balangan Coal Companies) each separately have an IUP over an area of 7,500 ha that covers the Balangan Coal Companies deposit. AE has 75% equity stake in each company.
The coal has a calorific value of between 4,200 to 4,400 kcal/kg, gar, and has low ash and very low sulphur, less than 0.1%. The deposit is located approximately 11 km southeast of AI’s CCOW and the Balangan Coal Companies’ mining operations can use AI’s supply chain. SIS is the mining contractor for the operations.
Adaro Metcoal Companies
In May 2016, two AE’s subsidiaries, ATA and CTI entered into a conditional agreement with BHP Billiton to acquire 100% of their coal assets in Central and East Kalimantan. ATA previously held 25% of the assets in a joint venture with BHP Billiton. The assets comprise seven Coal Contracts of Work (CCoW), i.e. Lahai, Maruwai, Pari, Kalteng, Sumber Barito, Juloi, Ratah and include an operating mine, the Haju Mine in the Lahai CCoW, and associated infrastructure. The acquisition process was concluded in October 2016.
BHP Billiton initially explored the Maruwai Coal Basin, in which the seven CCOWs are located in the late 90’s and made a significant capital investment over a number of years for studying and defining the potential and coal quality of the area. The basin is now considered to contain the largest relatively undeveloped metallurgical coal deposit in the world. The current declared metallurgical coal resource in the CCOWs is 1.27 billion tonnes, which is likely to increase as a result of the exploration program scheduled for 2017. Exploration during 2017 will also focus on defining a large thermal coal deposit identified in the Pari CCoW located in East Kalimantan.
The acquisition provides Adaro Group with significant and sustainable growth options in a new commodity – metallurgical coal. The group of CCoW companies are now referred to as Adaro MetCoal Companies (AMC). Metallurgical coal is an essential component in the production of steel and there is a high degree of confidence regarding the long term global demand for such a product.
PT Mustika Indah Permai (MIP)
AE has a 75% equity interest in MIP which holds a mining permit (IUP) for a 2,000 hectare coal concession in the Lahat district of South Sumatera that contains a medium energy and ultra-low pollutant sub-bituminous coal. Based on the JORC compliance report in 2016 the total estimated resources are 287.5 Mt and reserves are 254.0 Mt of a 4,292 kcal/kg (gar) coal. The MIP coal is suited for fuel supply to a dedicated mine-mouth power plant.
PT Bukit Enim Energi (BEE)
AE has a 61.04% equity in BEE. BEE holds a mining license (IUP) that covers an area of approximately 11,130 hectares near Muara Enim, South Sumatra, about 150 kilometers south west of the provincial capital of Palembang.
Land ownership and land use identification continued. The area is used for residences, agriculture, timber plantations and oil and gas production with associated pipelines. The complexity of land use requires detailed land ownership identification. Further work on this aspect is planned. Development options of the coal continued to be studied. Such options include a minemouth power plant, coal upgrading and underground coal gasification.
PT Bhakti Energi Persada (BEP)
BEP owns seven subsidiaries who each own a mining license (IUP) that in total covers about 34,000 hectares. The IUP’s are in the Muara Wahau district, Kutai Timur, East Kalimantan, approximately 250 kilometers north of Balikpapan and 125 kilometers from the coast.
AE owns 10.22% of BEP. In 2012, AE entered into a convertible loan and share subscription agreement with the option to provide a loan to BEP of up to US$500 million, convertible up to 51% of equity in BEP (Option One), and an option agreement to acquire BEP shares from its controlling shareholders by offering newly issued shares of AE (Option Two). The validity period for these two options is up to 2021.
The seven IUP’s contain a large contiguous coal deposit close to the surface with an estimated resource of 7.96 billion tonnes. All the coal is low in sulphur and ash but with a high moisture content. The large coal resource provides a number of development options for BEP. Evaluation work of the options continued, including on coal upgrading, coal to chemicals and particularly on a mine mouth power plant to supply electricity to the PLN grid. Some land purchase was done and environmental monitoring and social programs continued.