Resources Prima coal output drops 50% due to heavy rainfall

By Romel S. Gurky

SGX-listed Resources Prima Group reported on Wednesday that coal production at its mines in East Kalimantan dropped by 50.1 percent, to 381,141 tons in the first-half of this year (HY2017) from 764,394 tons in HY2016 due among others to heavy rainfall.

The company said in a statement that coal output decreased by 55.8 percent, to 137,784 tons in the second quarter of this year (2QFY2017) from 311,654 tons in 2QFY2016.

?Although the main determinant of coal production is the mine plan and related stripping ratio, coal production in HY2017 was adversely affected by the dewatering problems associated with the mining area due to heavier than normal rainfall and the inability to properly control the inflow of water from the rainfall. The dewatering problems associated with the normal dumping area also resulted in an increase in the distance and costs for the dumping of overburden,? Resources Prima said in the statement.

Coal sales decreased by 57.3 percent to 347,660 tons for HY2017 from 814,473 tons for HY2016, and by 61.1 percent to 126,388 tons for 2QFY2017 from 325,099 tons for 2QFY2016 due to lower coal production.

The significantly lower production also resulted in higher costs per ton which adversely impacted cash generation in HY2017, the company said.

As has been previously reported, all coal production at the company?s mines in Kutai Kartanegara Regency, run by main operating subsidiary PT Rinjani Kartanegara, ceased with effect from June 23, 2017 due to the cessation of waste mining operations by PT Cipta Kridatama (CK), the mining contractor.

The average selling price (FOB Barge) of the group?s coal increased by 65.6 percent to US$61.6 per ton for HY2017 from $37.2 per ton for HY2016, and by 63.3 percent to $60.1 per ton for 2QFY2017 from $36.8 per ton for 2QFY2016. ?The increase was in line with the increase of ICI2 to $71.3 per ton as at end of June 2017 from $47.9 per ton as at end of June 2016.?

Resources Prima said the stripping ratio, which is the key determinant of operating cost, and the mine plan are continually reviewed and updated based on current and future market considerations. In accordance with the mine plan, the average stripping ratio increased by 2.9 bank cubic meters of overburden per ton of coal (bcm/t) or 36.3 percent to 10.9 bcm/t in HY2017 from 8.0 bcm/t in HY2016. The increase in the average stripping ratio was due to ongoing depletion of the group?s first ?borrow-use? permit (?IPPKH1?) and production from the second ?borrow-use? permit (IPPKH2).

Although total cost of goods sold decreased for HY2017, the cost of goods sold per ton increased by US$11.7 per ton or 35.6 percent to $44.6 per ton in HY2017 from $32.9 per ton in HY2016. This increase resulted primarily from an increase in: (i) the waste mining rate; (ii) increase in stripping ratio and (iii) fixed costs per ton due to lower coal production.

Revenue decreased by 27.4 percent $22.3 million in HY2017 from $30.7 million in HY2016 and by 33.8 percent to $8.0 million in 2QFY2017 from $12.0 million in 2QFY2016.

Revenue from coal sales decreased by 29.1 percent to $21.7 million in HY2017 from $30.6 million in HY2016 and by 36.2 percent to $7.7 million in 2QFY2017 from $12.0 million in 2QFY2016 due to the decrease in sales quantity by 57.3 percent to 347,660 tons in HY2017 from 814,473 tons in HY2016 and by 61.1 percent to 126,388 tons in 2QFY2017 from 325,099 tons in 2QFY2016.

This decrease was partially offset by an increase in the average sales price of 65.6 percent to $61.6 per ton for HY2017.

Revenue from facility usage increased by more than 100.0 percent $0.6 million in HY2017 from $0.1 million in HY2016 and by $0.3 million to $0.3 million in 2QFY2017 from nil in 2QFY2016 as a result of higher throughput from a third party mine owner.

The gross profit decreased by $0.3 million in HY2017 and by $0.6 million in 2QFY2017 mainly due to the decrease in revenue. The decrease in revenue resulted from a decline in sales quantity, which was partially offset by the increase in the average selling price.

The gross profit margin increased to 23.7 percent in HY2017 from 18.2 percent in HY2016 and decreased to 7.7 percent in 2QFY2017 from 10.3 percent in 2QFY2016, due to the above mentioned reasons.

Editing by Reiner Simanjuntak