Study says many coal companies in Indonesia inefficient

A study conducted by a U.S. research institute, Duckett Resources Inc., shows coal processing by many coal companies in Indonesia was inefficient, resulting in the loss of about 20 percent of coal being processed.

The study conducted almost one year from 2000 through 2001 revealed that in 500,000 tons of processed coal, about 100,000 tons were disposed of waste despite the fact the large portion of them were recoverable.

The Indonesian government suffers a potential loss of $226,800 from the processing of every 500,000 tons of coal, the study said.

The study, whose result was made avaialable to Petromindo.Com on Tuesday, was carried out as a joint project of Indonesia's Ministry of Energy and Mineral Resources and the United States Department of Interior.

According to the study, if mining companies use better coal processing system, namely the so-called fine coal recovery circuit, they could recover about 80 percent of the lost coal, that totaled 20 percent of the processed coal.

Thus, using this fine coal recovery circuit, about 80,000 tons of the 100,000 tons of lost coal in every 500,000 tons of processed coal could be recovered as a high quality coal.

Based on samples taken from a company in East Kalimantan, the study said, the recovered coal could have up to 6,723 kilo calorie per kilogram, thus still better in quality than the coal produced by state-owned PT Tambang Batubara Bukit Asam that has only 5,500 kilo calorie per kilogram.

Therefore, when it is valued in U.S. dollar, if coal mining contractors adopt the fine coal recovery circuit, the government could collect an additional income of US$226,800 from every 500,000 tons of processed coal, the study said.

This figure was obtained using the assumptions that coal mining companies could recover 80,000 tons from every 500,000 tons of processed coal, and an average international coal price of US$21 per ton of coal.

The 80,000 tons of recovered coal would sell at about US$1,680,000. As the government is entitled with 13 percent of royalty, thus, it would get $226,800, the study revealed.

The research institute said coal mining contractors would need to invest around $1.225 million for the fine coal recovery circuit system with capacity of 500,000 tons per annum.

This investment would not affect the company's net revenue in the first year of investment, the institute assured.

The institute noted that a coal mining company that invested in the fine coal recovery circuit would get various benefits, including increasing amount of recovered coal, decreasing amount of waste and dust, and improving earnings as well as contribution to the government.

According to data at Petromindo, national coal production reaches between 70 million tons and 74 million tons per annum. If all coal contractors invest in the fine coal recovery circuit, about 11.2 million tons of coal could be recovered per annum and would not be disposed as waste, and this would contribute additional income both for the contractors and the government. (Amoros)