Berau obtains discount from key contractor

By Romel S. Gurky

IDX-listed coal mining firm PT Berau Coal Energy Tbk has obtained a 15 percent tariff discount from its key mining contractor PT Bukit Makmur Mandiri Utama (BUMA) for operation at its Lati mine in East Kalimantan, which bodes well for the company?s cost efficiency efforts.

The company, a subsidiary of London-listed Asia Resource Minerals (ARMS), said that it was also seeking for rate reductions from other contractors to cover other mines.

?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% rate reduction at Lati,? ARMS said in second quarter interim results.

?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,? it added.

Berau?s other contractors include PT Ricobana Abadi, PT Darma Henwa Tbk.

Elsewhere, the company further explained that 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 H2 (second semester),? it said.

Fuel additives are fully deployed at all Berau Coal mines resulting in a 3 percent reduction in fuel usage. Berau is continuing to investigate measures to control and measure its fuel usage with the focus on improving its fuel management systems.

Editing by Reiner Simanjuntak