BIB gets approval to up annual output to 7.5mt, plans further rise next year

By Romel S. Gurky

SGX-listed Golden Energy and Resources Limited (GEAR) said on Monday its indirect subsidiary PT Borneo Indobara (BIB), which owns a 24,100-hectare coal concession in South Kalimantan, has received approval from the Indonesian government to raise coal production to 7.5 million tons per year.

GEAR said in a statement that subject to market demand and government approval, it was looking to further increase BIB?s production to 12 million tons per year in 2017 as it seeks to benefit from the recent rally in coal prices.

BIB, which is owned by IDX-listed PT Golden Energy Mines Tbk (GEMS), which in turn is 67 percent owned by GEAR, last year produced 6.3 million tons, accounting for 72.4 percent of GEMS? total output.

GEAR said demand for BIB?s coal is evidenced by its own coal brand ?BIB4200? which has throughout the years, been experiencing strong and continuous demand from both domestic markets in Indonesia as well as international markets, inter alia, China, India and South-East Asia.

To support the increase in BIB coal output, GEAR said it has put in place a wholly-owned, transport infrastructure to achieve greater costs and time savings in the coal transhipment process. ?GEAR enjoys the distinct competitive advantage of having their conveyor belts extend 800 meters into the Java Sea, which enable direct loading onto large barges that are not subjected to tidal conditions unlike many of its competitors which load at riverfront,? it said in the statement. These conveyor belts have a maximum capacity of 1 million tons per month and barge loading rate of 3,000 tons per hour, providing ample support for the group?s planned output expansion.

GEAR explained that its transport infrastructure also encompasses other strategic assets, such as a dedicated port as well as BIB-controlled hauling roads. Collectively, these assets afford the group greater control over its coal shipment schedule thereby, increasing coal transport efficiency while minimizing risk of delays as compared to other competitors using public infrastructure such as roads and jetties. GEAR?s port is located at an average of 25 km from the mining pits, which is considered to be in close proximity, compared to other competitors? mining pits in South Kalimantan.

The BIB concession is GEAR?s largest coal reserve with an estimated 1.78 billion tons of coal resource. The group also has two other concessions, one in Jambi and another in Central Kalimantan, with estimated coal resources of 256 million tons and 77 million tons, respectively.

Fuganto Widjaja, Executive Director and Group CEO of GEAR said, ?The BIB concession has an excellent mining potential given the low average strip ratio of its open-cut pits and the vastness of its resource. The approval by Indonesia?s Energy and Mineral Resources Ministry comes as a significant step in GEAR?s plans to upsize BIB?s coal output to 12.0 MT per annum in order to meet the fast-growing coal demand in Indonesia, and it positions us well to benefit from the recent uptrend in coal prices.?

Editing by Reiner Simanjuntak