Berau?s full year production up 11.7%

By Romel S. Gurky

LSX-listed Asia Resources Minerals (ARM) announced on Friday the coal production of its subsidiary PT Berau Coal Energy grew by 11.7 percent in 2013, from 23.5 million tons in 2012, despite operations being suspended at the end of the year because the government imposed production limit had been reached.

The additional coal production was from lower strip ratio, higher margin pits, most notably Binungan 7. This resulted in an overall reduction of the strip ratio by 8 percent to 8.8 bcm/ton. All mines at Berau performed well throughout the year with weather delays in line with the plan during the first quarter. At the end of the year operations at the small, high cost Sambarata B East pit were suspended resulting in a 500,000t reduction. Berau also moved to consolidate its mining contractors from seven to five.

Coal processing and shipping also delivered strong performances for the year, with record shipments at 23.3mt for the year, 10.6 percent above the 2012 performance and the vessel loading rate topped 28.1kt/day. Berau successfully trialed 330 foot barges between the Suaran port and the Muara Pantai transhipment point, which will result in a more efficient barging operation in the future. In addition dredging of the Segah River near the Lati port has allowed barges to be loaded to in excess of 7,000 tons, whereas previously cargos were capped at 5,500 tons.

Berau's average selling price (on a free on board basis) (ASP) was $59.6 per ton for 2013 (2012:$70.9 per ton), reflecting ongoing weakness in thermal coal markets. The ASP was stronger in the first half because older sales contracts had not expired. Production costs for the year were $38.6/ton and in line with 2012. Whilst the strip ratio and waste hauling distances were lower, these savings were offset by increased coal hauling distance and the impact of the one week shutdown at the end of the year. In light of the ongoing weak market conditions, Berau reduced its need for capital expenditure, by rescheduling projects and identifying more cost efficient solutions, this resulted in capital expenditure of $46 million (2012 :$101 million-restated).

In terms of sales by destination, 85 percent were exports (mainland China: 36 percent, Taiwan: 19 percent, India 12 percent, South Korea: 10 percent, Rest of Asia: 8 percent), with the remaining 15 percent sold domestically into Indonesia.

Meanwhile, ARM announces the following appointments and changes to the constitution of its Board and Committees.

Chris Walton, who joined the Board as an Independent Non-Executive Director on January 1 2014, becomes Chairman of the Board of the Company.

All Independent Non-Executive Directors are now members of the Nomination Committee. Also, in accordance with the terms of the Borneo Relationship Agreement, Samin Tan has joined the Nomination Committee. Chris Walton becomes Chairman of the Nomination Committee.

Nick Salmon, Senior Independent Director, joins the Audit, Remuneration and HSEC Committees.

Editing by Johannes Simbolon