Indonesia’s Adaro Raises Production to 46MMt of Coal This Year

Coal mine - Photo by Adaro Energy

JAKARTA (TheInsiderStories) – Indonesian coal miner PT Adaro Energy Tbk (IDX: ADRO) will adds capacity production to around 46 million metric tons (MMt) of coal in this year from the initial planned 44 MMt of coal, said the president on Monday (27/08).

“We estimated could raises our production around 2-3 MMt of coal this year,” Garibaldi “Boy” Thohir told reporters at the State Palace.

Indonesian government has officially raised the production quota for 2018 by 25 MMt of coal to 510 MMt of coal from the initial planned was 485 MMt of coal. Last year the local miners produced 461 MMt of coal.

As we know, Indonesia’s President Joko Widodo has canceled a plan to revoke domestic market obligation (DMO) policy for coals on July 31. DMO is a mandate of Law No.4 of 2009 on Minerals and Coal.

Minister of Energy and Mineral Resources (MEMR) Ignasius Jonan said, this decision was taken in a limited meeting with 17 state officials in Bogor Palace. The meeting was aimed to discuss the foreign exchange reserve, of which discussed the continuation of DMO policy for coals, bio diesel and domestic component level.

At the limited meeting on August 14/8, President Widodo provide a number of directives. One of them is by opening up opportunities for additional coal production of 100 million tons. The EMR ministry was then issued Decree No. 1924K/30/MEM/2018 on Amendments to the Determination of Minimum Percentage of Coal Sales in the Interest of the Interior 2018.

Followed the decision, said Bambang Gatot Ariyono, the ministry’s director general of minerals and coal for the EMR ministry on August 20, the policy is part of a trade-off for a cap price of the commodity purchased domestically by state-owned power producer PT Perusahaan Listrik Negara. Higher production of coal is expected to bring more foreign exchange revenue from exports, thus helping to stabilize the already volatile Rupiah.

According to Ariyono, up to now, there have been 40 companies that submitted the additional production to the ministry. He continued, there were already around 25 MMt of coal of additions submitted, but that was still in the process of approval.

Adaro now has six coal minings namely PT Adaro Indonesia, PT Balangan Coal, PT Mustika Indah Permai, PT Bukit Enim Energi, PT Adaro MetCoal and PT Bhakti Energi Persada located in Sumatera and Kalimantan.

In the second half (1H) of 2018, the coal miner has produced 24.06 MMt of coal, lowered compared to previous 1H 2017 of 25.13 MMt of coal caused of the wether conditions. The sales volume also declined 6 percent from 25.27 MMt of coal to 23.81 MMt of coal.

The declining in sales volume not disrupt the company’s revenues. In the 1H 2018, Adaro booked net profit US$1.61 billion, or rose 4 percent from a year ago $1.55 billion. But the net profit dropped 10 percent from $299 million to $269 million in the first semester of this year due to .

The domestic market contributed to 22 percent of total sales in the first semester this year, followed by export to Malaysia (12 percent), China (12 percent), India (12 percent), Japan (10 percent), South Korea (9 percent), Hong Kong (8 percent), Spain (5 percent), Taiwan (4 percent), Philippines (3 percent), Thailand (2 percent), and others (1 percent).

Recently, Adaro Energy and EMR Capital Ltd completed acquisition process in Australia’s Kestrel Coal Mine on August 1. It is a follow-up of an agreement between Adaro and EMR on March 27 to acquire 80 percent of Rio Tinto‘s coal asset Kestrel.

Boy said the Kestrel acquisition is an important step in the company’s expansion in the metallurgical coal that has been started with Adaro MetCoal. Kestrel produced 4.25 million tonnes of metallurgical coal in 2017 and has a marketable reserve of 146 million ton and resource of 241 million ton.

He earlier said the company aims to double Kestrel Mine’s production in attempts to bring the company to become one of the world’s largest coking coal producers. He aimed to raise Kestrel Mine’s current production to 10 million metric tons of coking coal per year from current 5.5 million tons.