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 coal of medium heat value between 4,000 kcal/kg and 5,000 kcal/kg GAR. AI’s coal has distinct low-pollutant contents and therefore branded as Envirocoal. The latest addition to AI’s product portfolio, E4200, also continues to receive strong interests in the markets and in 2017 constituted approximately 15% of AI’s sales.
AI produced 47.7 Mt of coal in 2017 or decreased 6% from 2016, comprising 36.7 Mt from Tutupan pit or 11% lower y-o-y; 6 Mt from Paringin pit or 4% lower y-o-y; and 5 Mt from Wara pit or 52% higher y-o-y. AI removed 225.3 Mbcm of overburden or a decline of 2% compared to 2016, resulting in a strip ratio of 4.72x, compared to 4.52x in 2016.
It is predicted that the world’s coal markets in 2018 will still be faced with uncertainties and volatility as governmental policies will have stronger influence over market directions. AI will cope with this situation by continuing to pursue direct sales to end users. AI also intends to keep expanding its markets in the emerging ASEAN countries such as Vietnam and the Philippines because the abundant reserves of its products, especially E4200, can offer most benefits to these countries in the form of long-term supply reliability for new or upcoming power plants in this region, for a competitive price.
Balangan Coal Companies
PT Semesta Centramas (SCM), PT Laskar Semesta Alam (LSA) and PT Paramitha Cipta Sarana (PCS) (Balangan Coal Companies) separately holds an IUP over a total area of 7,500 ha that covers the Balangan Coal Companies’ deposits. The Adaro Group has 75% equity stake in each company.
In 2017, the concessions produced a total of 3.21 Mt of coal, almost double the 2016 production figure of 1.65 Mt. Total overburden removal was 7.70 Mbcm, or 92% higher than 4.01 Mbcm in 2016, resulting in a strip ratio of 2.4x.
The three coal licenses constitute an important part of the Adaro Group’s coal mine portfolio because they provide additional sources for thermal coal and extend the group’s product diversification. 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 very low sulfur content of less than 0.1%.
The coal produced by Balangan Coal Companies will strengthen AE’s supply reliability and complement AI’s coal. As operations at Balangan Coal Companies progress, continuous market development efforts and higher production capacity will present to them further growth opportunities.
Adaro Metcoal Companies
Adaro MetCoal Companies (AMC) refers to a group of seven companies holding Coal Contract of Work (CCoW) for seven concession areas in Central and East Kalimantan provinces that were entirely acquired by the Adaro Group from BHP Billiton in October 2016. These CCoWs currently constitute 1.27 billion tonnes of premium quality metallurgical coal resources with ultra-low ash and phosphorus content. The Maruwai Coal Basin, where the seven CCoWs are located, contains the largest relatively undeveloped metallurgical coal deposit in the world.
Lahai, the only operational concession within the seven CCoWs, produced 0.90 Mt of semi-soft coking coal in 2017, more than three times its production in 2016 of 0.22 Mt. Overburden removal in this concession during the year reached 5.75 Mbcm, or increased more than six folds compared to 0.82 Mbcm in 2016, resulting in a strip ratio of 6.39x.
Lahai’s Haju mine produces a range of metallurgical products which especially attract global steel producers. In addition to offering metallurgical products, Lahai also has a high energy thermal product highly regarded in the markets. In 2017, AMC focused on expanding the sales of its semi soft coking coal in both overseas and domestic markets. AMC’s coal sales in 2017 reached 0.74 Mt, delivered to customers in Europe, Japan, India, China and Indonesia.
Feasibility studies are currently being undertaken to evaluate and prioritize the sequential development of the remaining CCoWs.
While developing these valuable resources, the Adaro Group continues to work with local communities and stakeholders to integrate sustainable environmental and community development programs into the development plans.
PT Mustika Indah Permai (MIP)
AE’s foothold in the coal-rich province of South Sumatra is established through PT Mustika Indah Permai (MIP) and PT Bukit Enim Energi (BEE). AE views South Sumatra as a highly strategic growth area owing to the province’s proximity to the large power market of Java and its large coal resources and reserves. In order to diversify operations and increase reserves, AE made the entry into both of the South Sumatra assets in 2011 and since then has continuously explored viable development options for both assets to create maximum shareholder value.
AE has a 75% equity interest in MIP, which holds a mining license (IUP) for a 2,000 hectare coal concession in the Lahat district of South Sumatera that contains medium energy and ultra-low pollutant sub-bituminous coal suited for power generation. Based on the JORC compliance report of 2017, MIP has total estimated coal resources of 287.5 Mt and coal reserves of 254.0 Mt of a 4,292 kcal/kg (gar) coal.
In 2017, MIP continued its drilling programs, purchased land, prepared mine readiness, and explored transportation routes and development options. AE plans to commence operations from MIP in the latter part of 2018, with an initial production target of 0.5 Mt to 1 Mt. SIS will be the prime mining contractor for MIP, providing services from contract mining, civil works to infrastructure development.
PT Bukit Enim Energi (BEE)
In BEE, AE holds a 61.04% equity interest. BEE 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.
In 2017, BEE continued the geological evaluation and exploration work on the property. A large deposit of sub-bituminous coal is indicated but detailed evaluation is required to confirm this. Development options for the coal were continuously explored. Such options include a mine-mouth coal-fired power plant, coal upgrading and underground coal gasification.
PT Bhakti Energi Persada (BEP)
PT Bhakti Energi Persada (BEP) owns several subsidiaries, seven of which own a mining license (IUP) that covers a total of around 34,000 ha greenfield mining areas in the Muara Wahau regency of East Kalimantan province, about 250km north of Balikpapan and 120km to the coast. ATA owns 10.22% of BEP, and in 2012 ATA 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). These two options are valid until 2021.
The seven IUPs contain a large contiguous coal deposit situated close to the surface with an estimated resource of 7.96 billion tonnes. The coal has high moisture content, but is low in ash and sulfur contents, making it suitable for power generation. The large scale of the coal resource provides a number of development options for BEP, one of the feasible options being the possibility to develop a mine-mouth coal-fired power plant to supply electricity to the PLN grids, by consuming BEP’s coal. If we choose to pursue this option, we intend to partner with PLN for both power plant and coal mine development projects.
In 2017, BEP continued the evaluation of its development options, environmental impact assessment, corporate social responsibility programs and preparation for mine readiness.