Berau H1 coal output up 5%, on track to meet full-year target
Friday, August 29 2014 - 01:43 AM WIB
London-listed Asia Resources Minerals Plc (ARMS) said that coal production at its subsidiary IDX-listed PT Berau Coal Energy Tbk increased by 5 percent to 12.1 million tons in the first six months of this year from 11.5 million tons in the same period of last year.
?Production growth during the first half was in line with our full year target of 24.2 million tons,? ARMS said in a statement Thursday. The company has earlier said that the government of Indonesia has increased the company?s 2014 production quota to 24.2 million tons.
ARMS said that sales also increased by 5 percent during the period. In terms of sales by destination, 44 percent of sales went to China (including Hong Kong),11 percent to India and 30 percent went to the rest of Asia (including Taiwan and South Korea), with the remaining 15 percent sold domestically into Indonesia.
The company said that conditions remain very tough for thermal coal with market still in over-supply and more production growth forecast for 2014. Long term contracts and take-or-pay agreements are also continuing to slow the reduction in capacity needed to boost the coal price.
Providing further details of Berau Coal?s first-half performance, ARMS said that waste and coal haul distances were higher than the previous year. The waste distance was driven by longer leads to out-of-pit dumps and coal distance increased as a result of longer hauls at Lati mine. Both waste and coal distances were lower than target. Strip ratio also increased due to a change in mix of production from Binungan 7 mine to Lati. Lower than planned sales during the second quarter also negatively impacted strip ratio as the focus temporarily shifted to overburden removal.
?During the first half of the year there have been no significant interruptions for weather related events, ARMS said.
Work has commenced on the upgrade of the Binungan Coal Handling and Processing Plant (CHPP) and Suaran Port facility to allow the capacity of the Binungan mining operations to increase from 9 million tons to 18 million tons per annum. ?Given the longer term objective to move production to the lower cost Binungan area this project is strategically important to Berau Coal and expected to be completed by the third quarter of 2015,? it explained.
Agreements have been achieved for rate reductions with a number of mining contractors, and an agreement has been signed with BUMA, Berau Coal's largest mining contractor for a 15 percent rate reduction at Lati. ?Given continued weakness in the coal price Berau Coal is seeking further cost relief from contractors in order to continue operations in some pits. In the event this relief is not forthcoming, operations in some pits may be suspended and operations moved to lower cost mining areas.?
Fuel costs continue to be a major focus both from a unit cost perspective and usage. Berau Coal renegotiated its main fuel supply contract to double the level of discount it was receiving, resulting in a significant reduction in unit costs. Benefits from the new arrangement are expected to manifest in the second semester of this year. Fuel additives are fully deployed at all Berau Coal mines resulting in a 3 percent reduction in fuel usage. Berau said it is continuing to investigate measures to control and measure its fuel usage with the focus on improving its fuel management systems.
Barging performance in the first-half of this year has seen a significant increase in productivity versus the previous year. This is largely as a result of the reduction in the size of the barge fleet by 4 units and a 12 percent increase in barge payload due to the dredging of the river at Lati and the use of larger barges at Suaran, the company said. ?The expiry of hire contracts on existing barges at the end of 2014 should allow a larger improvement in barge payloads thereafter.?
Despite the savings, overall production costs increased during the period to $38.2 per ton, compared to $37.1 per ton last year, ARMS said. This was mainly due to a higher strip ratio of 8.8 bcm/t (8.7 bcm/t in 2013), and increased hauling distances. Higher dead freight than 2013 also meant higher costs for transhipment.
Berau's assets are located in the north eastern part of Kalimantan and consist of three operating mines, namely Lati, Binungan and Sambarata.
| Operating Data | 6 months to 30 June 2014 | 6 months to 30 June 2013 | Year to 31 Dec 2013 | H1 14 v H1 13 |
| Coal mined (mt) | 12.1 | 11.5 | 23.5 | 5% |
| Sales (mt) | 12.1 | 11.5 | 23.5 | 5% |
| FOB average selling price ($/t) | 56.5 | 61.4 | 59.6 | (8)% |
| Production cost of sales ($/t) | 38.2 | 37.1 | 38.6 | 3% |
Stripping ratio (bcm/t)1 |
8.8 | 8.7 | 8.8 | 1% |
| 1. Bank cubic metres (bcm) of overburden removed per tonne of coal mined. | ||||
Editing by Reiner Simanjuntak