CARSURIN

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November 2015

carsurin coal & minerals insider

 November 2015

IN THE FIELD BY CARSURIN

Sumatra
• PT Bukit Asam Tanjung Enim relies on PT KAI to transport coal and never uses other than rail to distribute their
products. For 24 hours every day, the coal is loaded from several TLS heading towards Lampung and Palembang to be
sent to the customer by ship. (Tribun News)
• Head of Mining and Energy Ogan Komering Ulu (OKU) of South Sumatra said the potential of coal, which reached 1.1
billion tons in the district of OKU has not been used optimally. Untuk now, it’s been only used by two of the seven
national private companies. (Energi Today)
• Illegal mining activity is not only encroached on the land, but also began to tear apart the Kerinci National Park (KNP).
KNP is the largest national park in Sumatra, which stretches across 4 provinces. Some regional points of illegal gold
miners intake in KNP are in Merangin District, Jambi Province. Many illegal gold miners have been found in Merangin.
A number of creeks sourced from KNP were gone and crushed by illegal gold miners. (Energi Today)
• Medco Energi International Mining plans to build underground coal gasification in Palembang. However, the
exploration can not be done by subsidiary of PT Medco Energi International because no permission from the
government has been granted. Energy and Mineral Resources Ministry said the potential assessment is still carried
out and auction process is necessary to be conducted. (Tribun News)
• PT Indoferro is currently boosting its construction activity of purification plant (smelter) Nickel Pig Pron unit II with a
capacity of 250,000 tons per year in the Industrial Estate Cilegon, Banten, which will operate in February 2016. Smelter
construction of phase II has reached 70% so far. (Energi Today)

Kalimantan
• PT Timah (Persero) Tbk (TINS) complained to the Commission VII of the House of Representatives on tin smuggling
performed by illegal miners. The smuggling makes Indonesia’s tin prices down. Tin is illegally smuggled by sea to
neighboring countries such as Thailand. (Energi Today)
• Improvements and regulation in the mining sector certainly be delayed until November 2015. While the certainty of
the mining permit holders (IUP) which are not yet having clean and clear status (CnC) is determined in this October.
According to the Director General of Minerals and Coal (Minerba) of Energy and Mineral Resources Ministry (ESDM),
the mining improvements involve various agencies including the Corruption Eradication Commission (KPK). (Energi
Today)
• PT Adaro Energy Tbk has transformed its business which used to be only mining, into the energy business. As coal
prices collapsed at the moment, Adaro Energy has a logistics business, mining services and power plants. Adaro has
established a joint venture with Shenhua Overseas business for power plants in Kalimantan, Korea EWP in South
Kalimantan and Japan in Batang, Central Java. (Energi Today)

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November 2015

Bumi Resources aims to

restructure debts
- 5 October 2015 -

The Jakarta Post, Jakarta - Bumi Resources, the country’s billion, including $1.19 billion owed to the China Investment
largest coal mining company, is proposing another debt- Corporation (CIC). Bumi, which is affiliated with politician
restructuring scheme to its lenders, involving converting a and tycoon Aburizal Bakrie, has been struggling to service its
portion of its US$3.9 billion debts into 32 percent ownership debt amid depressed coal prices.
of the company.
Beckham said the company also hoped to pool around $100
Bumi finance director Andrew Christopher Beckham said the million from selling a part of its asset Fajar Bumi Sakti and
company hoped to sign an in-principal agreement for the would also propose to exchange a total $630 million of loans
proposal by the fourth week of October, when a legal action from CIC and the China Development Bank (CDB) into stakes
moratorium granted by a Singaporean court expires. in the company’s unlisted subsidiaries.

The restructuring aims to lower the company’s debt to $1.2 Bumi’s average selling price, excluding its Ecocoal output,
billion by January at the soonest, as the firm expects to lost nearly half of its value from $99.8 a ton in 2011 to $55 a
take three to four months to persuade lenders and to hold ton by the first half of this year.
a general shareholders meeting in December, according to
Beckham. The scheme would, according to Beckham, leave Bumi with
five-year debts of $1.2 billion, which will be split equally
The proposal, he said, included converting $1.9 billion of into Trance A and Trance B loans bearing a 6 percent annual
debt into a 32 percent stake in the company through a non- interest to be paid each quarter and a 9 percent interest paid
preemptive rights issue at a price more than 20 times higher when the debt is due.
than Bumi’s current mooted share price of Rp 50 apiece.
The company can pay the debts ahead of time if it can secure
The conversion would result in the dilution by around 32 excess cash, which was possible if coal prices climbed above
percent of each current stake. Currently, the public holds a $60 to $70 per ton, Beckham said.
70.57 percent stake.
Bumi’s recorded net losses attributable to owner stood at
“If it’s done according to this proposal, share pieces will be $555.74 million in the first half, a stark contrast with its net
Rp 1,100. That’s why there might be more discussion [on this profit of $149.4 million in the corresponding period last year.
issue],” Beckham told reporters after a public expose held The firm’s revenues were down by around 41 percent year-
over the weekend. He added that the plan would be good for on-year to $21.5 million in the first six months of this year.
everyone and would reflect the value of the company, which
is $4.6 billion. Bumi units skipped a semi-annual coupon payment on $700
million of 10.75 percent 2017 notes in November following
“It depends on the equity valuation [...] and the debts will be a 30-day grace period, prompting Standard & Poor’s and
converted at that value. [The debts] will be converted into Moody’s Investors Service to declare a default, according
shares and rupiah. They get 32 percent of the company with to a Bloomberg report. The miner also missed an interest
this value.” payment on $300 million of 12 percent 2016 securities in
December.
Bumi’s outstanding debts as of August stood at $3.98

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November 2015

Indonesia’s mining sector remains

attractive for Australian businesses
- 7 October 2015 -

Invest in Australia - Ongoing opportunities mean that investment; Freeport Indonesia, Vale and Weda Bay Nickel
Indonesia’s mining sector remains attractive for Australian have all made significant investments in recent years.”
businesses, despite some challenging conditions. This was
the message to come out of last month’s Ozmine conference, Participants at this year’s two-day programme participated
‘Mining for Growth’, which was held in Jakarta. in seminars and panel discussions, gained insights from
experts about business opportunities and the regulatory
Ozmine, the Australian Government’s annual mining environment, and networked with leading industry officials
conference, is Australia’s premier mining event in the across the mining supply chain.
Association of South East Asian Nations (ASEAN) region. Now
in its ninth year, Ozmine has broadened to include not just Australian METS delegates also met with representatives
Australia and Indonesia but the whole of ASEAN, reflecting from PT BUMA, Theiss Indonesia, and Royal HaskoningDHV to
the growth of trade ties across this fast growing region where promote their capabilities, build direct connections, and to
mining plays an increasingly important role. hear insights about the companies’ operations in Indonesia.
The conference keynote address was delivered by Pak Yun
Michael Helleman, Austrade’s Trade Commissioner in Yunus Kusumahbrata, Expert Staff to H.E. Mr Sudirman Said,
Jakarta, said Ozmine was especially important as a Minister of Energy and Mineral Resources.
venue for Australia’s highly regarded Mining Equipment,
Technology and Services (METS) companies to showcase “Pak Yunus Kusumahbrata provided an update on Indonesian
their capabilities. Government mining and energy policy, noting that coal
would remain an important part of the energy mix but that
“Indonesia continues to be an important player in the global renewables and clean coal technology would be important
mining scene with significant levels of coal, copper, gold, for Indonesia in the future,” said Helleman.
tin and nickel,” said Helleman. “Global mining companies
continue to rank Indonesia highly in terms of coal and mineral Indonesia is Australia’s 12th largest trading partner, with
prospects; however, their assessments of mining policies and two-way trade valued at A$15.7 billion in 2014. The two-
the investment climate are less positive,” he said. way investment relationship was valued at A$9.6 billion in
2014 and there are more than 200 Australian businesses in
“Despite this, Indonesia continues to attract significant Indonesia.

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November 2015

Indonesia’s HBA coal price

Platts, Singapore - Indonesia’s Ministry of Energy and Mineral
drops 15% on year to record low Resources has set its October thermal coal reference price, also
$57.39/mt FOB known as Harga Batubara Acuan, at $57.39/mt FOB, a record low
since its inception in January 2009.
- 15 October 2015 -
October’s HBA is down 1.4% from September and down 14.7%
year on year.

The HBA is a monthly average price based 25% on the Platts

Kalimantan 5,900 kcal/kg gross as received assessment; 25%
on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25%
on the Newcastle Export Index -- formerly the Barlow-Jonker
index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the
globalCOAL Newcastle (6,000 kcal/kg NAR) index.

In September, the daily FOB Platts Kalimantan 5,900 GAR coal

assessment averaged $50.93/mt, while the daily 90-day Platts
Newcastle FOB price for coal with a calorific value of 6,300 kcal/
kg GAR averaged $56.11/mt.

The HBA for thermal coal is the basis for determining the prices
of 75 Indonesian coal products and for calculating the royalties
Indonesian producers have to pay for each metric ton of coal
they sell locally or overseas. It is based on 6,322 kcal/kg GAR coal,
with 8% total moisture content, 15% ash and 0.8% sulfur.

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November 2015

Coal exports drop on

low prices
- 29 October 2015 -

The Jakarta Post, Jakarta - The nation’s coal exports thermal coal, dropped to $54.37 per ton in April, the lowest
significantly dropped in the first nine months of the year level since May 2007, Bloomberg reported. Prices continued
as coal companies continued to suffer from low prices sliding over the last the three months, the longest run of
in addition to becoming increasingly dependent on the declining prices since April 2014, Bloomberg added. World
domestic market. Coal Association’s chief executive, Benjamin Sporton, said
in a recent interview that the global demand for energy was
Figures from the Energy and Mineral Resources Ministry’s expected to continue growing, particularly in new coal-fired
directorate general for minerals and coal showed that power plants between now and 2040.
national production reached 308 million tons from January
to September this year, declining by around 14 percent “The market is growing, the future for coal is strong and we’ll
compared to the 360 million tons produced in the same see prices rebound. Over the next few months, I’m not sure, it
period of last year. is very difficult to forecast but in the next couple of years we
will see prices rebound,” Sporton said.
“Out of total production, 235 million tons were exported,”
director for coal, Adhi Wibowo, said. While Chinese demand for coal would likely taper off, Indian
demand could become a key driver of coal prices thanks to
The export figure was equal to an almost 20 percent drop the country’s efforts to boost electricity capacity.
compared with the 293 million tons sold overseas during
the January to September period of last year. As many as 6 “In China, the coal share in the energy mix will decrease
million tons of coal are currently in inventories, a similar level because there is more utilization of gas, renewable energy,
at the end of September last year, according to Adhi. nuclear, and others. In India, there will be very significant
demand for coal due to plans to increase electricity capacity.
In a contrary trend, as much as 67 million tons were sold to Indonesia is increasingly using coal for its domestic market
domestic markets during the first nine months of the year, instead of exporting it,” Sporton said.
increasing by around 9 percent compared to the 61 million
tons delivered to domestic buyers in the same period last The government of Indonesia plans to see national coal
year. Coal mining firms have been struggling to survive production hit 425 million tons by the year’s end. The coal
amid a challenging business environment marked by low mining business remains a significant contributor to the
commodity prices partly caused by weakening demand country’s revenue of non-tax income. However, given the
against the backdrop of global economic uncertainties. pressure on prices, output is expected to be well below 400
million tons this year.
The government set the Indonesian coal reference price
(HBA) at US$57.39 per ton in October, an all-time low since The government has been encouraging miners to sell more
the reference was first introduced in 2009. The HBA price is of their coal to the domestic market, which is expected to
currently 10 percent lower compared to the $63.84 per ton expand following the government’s electricity procurement
set for January. program. While non-fossil energy sources are expected to
be part of the electricity procurement program, the share of
The price at Australian port Newcastle, the benchmark for coal-fired power plant development remains dominant.

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November 2015

Indonesia 2016 coal exports to

slump as low prices hurt miners -
industry
- 30 October 2015 -

Reuters, Jakarta - Coal shipments from Indonesia will plunge “To help its coal miners, whose sector and related industries
as much as 17 percent next year, with most miners in the employ about 1 million people, Indonesia’s government has
world’s No.1 exporter of thermal coal losing money and abandoned plans to ramp up coal royalties, Sjahrir said.”
slashing output, a senior industry official said on Friday.
Indonesia will export less than 300 million tonnes in 2016 The country’s finance minister had earlier said that plans to
from 330-360 million tonnes this year, the chairman of the increase government revenues from the mining sector would
country’s top coal industry association told Reuters. be shelved if prices stayed low. Top coal producers in the
Southeast Asian nation include Adaro Energy, Berau Coal,
Reduced shipments from the Southeast Asian nation could Bukit Asam , Kideco Jaya Agung and Bumi Resources.
help bolster international prices hit by oversupply and
slowing Chinese demand. Benchmark thermal coal has “To combat slowing Chinese and Indian demand for
dropped around 16 percent in 2015 to stand near nine-year Indonesian coal, which accounts for roughly half of the
lows at $51.84 a tonne. country’s total exports, miners are increasingly investing in
domestic power projects,” Sjahrir said.
“About 60-70 percent of domestic producers are underwater
-meaning that their cash flow is not enough to sustain their The government has set an ambitious goal of building 35
business,” said Pandu Sjahrir from the Indonesian Coal gigawatts of new power stations by 2019. But with the
Mining Association. He added that domestic coal demand majority of these new power plants likely to be coal-powered,
would be 90-110 million tonnes in 2016 compared to 90 there are doubts the country can meet its new commitment
million this year. on cutting greenhouse gas emissions growth by 29 percent
by 2030.
Indonesian miners are now either halting production or doing
“selective mining” of easier to access coal, said Sjahrir, who “The Indonesian government will have to increase power
estimates benchmark prices will average $60 a tonne in 2016. tariffs for consumers or offer subsidies to attract investment
A mining ministry official last week said Indonesia’s exports in modern and low-emission power plants to meet both its
of coal fell 20 percent from January to September this year. energy and greenhouse gas emissions targets,” Sjahrir said.

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November 2015

Future of BHP coal mines in Indonesia 2016 coal exports to

Indonesia hinging on mining slump as low prices hurt miners -
rules revision industry
- 31 October 2015 - - 30 October 2015 -

Mining.com, Jakarta - Mining giant BHP Billiton (ASX:BHP) Indonesia Investment, Jakarta - Indonesian coal exports are
may reconsidering its push into coal mining in Borneo, expected to fall below 300 million tons in 2016 as domestic
depending on the what comes out of the Indonesian miners are cutting coal production volumes due to low
government ongoing review of the sector’s regulations. Such coal prices. Indonesia’s October benchmark thermal coal
revisions, Reuters reports, include mandatory divestment reference price (set by the government) fell 1.4 percent (m/m)
and contract extensions, which could either support or to USD $57.39 per metric ton (FOB) and now stands at an
discourage BHP’s future investment decisions in the country. all-time record low since the start of this reference price in
January 2009. Meanwhile, global benchmark coal prices are
BHP began mining at the Haju coking coal mine during the nearly touching nine-year lows.
September quarter, in the first step toward what is expected
to be a wider presence in the region, under the company’s Pandu Sjahrir, Chairman of the Indonesian Coal Mining
IndoMet Coal project, in the Central Kalimantan province. Association (APBI), said the cash-flow of around 65 percent
of Indonesian coal miners is not enough to sustain their
The project has already raised concerns among businesses, hence deciding to cut output. Reduced coal
environmentalists, some of which were addressed by BHP output in Indonesia should manage to boost global coal
executives at the company’s annual meeting of shareholders prices which are nearly touching nine-year lows on the global
in London earlier this month. supply glut and slowing international demand, particularly
from China. Sjahrir expects coal prices to rise slightly in 2016
Opponents claim that IndoMet is too close to a significant to around USD $60 per ton.
orangutan population in the Upper Barito Basin. According to
World Wild Life (WWF) that population has declined by over Indonesia, the world’s top thermal coal producer, may export
50% in the past 60 years, and its habitat has been halved over between 330 and 360 million tons of coal in 2015. Meanwhile,
the past two decades. domestic coal consumption is estimated at 90 million tons
in 2015 and 100 million tons in 2016. Domestic consumption
While BHP have said that no orangutans have been found on of coal is expected to grow as the Indonesian government
its leases, it helped relocate 280 orangutans found nearby to targets to have built 35 gigawatts of new power stations,
other parts of Kalimantan. Haju will initially produce about mostly coal-fired, by 2019.
1 million tonnes of coal a year, while the larger IndoMet
complex is believed to have potential to produce around 5 Indonesian Production, Export and Consumption of Coal:
million tonnes of coal per year.

¹ indicates forecast
in million tons
Source: Indonesian Coal Mining Association (APBI)

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November 2015

Antam to float right

shares this month
- 7 October 2015 -

The Jakarta Post, Jakarta - After running a road show in Previously, Antam corporate secretary Tri Hartono said that
several Asian countries, state-run diversified mining company his firm had decided to appoint standby buyers only after
Aneka Tambang (Antam) will carry out its rights issue later the fixed price had been set. Antam is aware of the risk of not
this month. being able to reach the targeted funds as a consequence of
not having standby buyers.
Antam announced Tuesday that the company would offer
14.49 billion new shares at a price of Rp 371 (26 US cents) However, the company has appointed several underwriters
each to existing shareholders during the rights issue. With that would market its new shares in the event the rights
such a price assumption, the company expects to book about issue was not fully absorbed by its existing shareholders, the
Rp 5.38 trillion from the share offering. prospectus read. Of the targeted amount, as much as Rp 3.5
trillion would be used by the company to fund the first phase
Previously, in its rights issue proposal filed with the Indonesia of the construction of its ferronickel smelter in Halmahera,
Stock Exchange (IDX) in September, the company said it North Maluku.
would offer the shares at a price between Rp 371 and Rp 535.
The company will list the new shares on the IDX on Oct. 22. The company expected the construction of the smelter,
which would have a capacity to produce between 13,500 tons
The government, as the holder of 65 percent of the company’s to 15,000 tons of ferronickel in nickel (TNi) a year, would be
total shares, will fully exercise its rights to the new shares finished in 2018.
as part of the government’s capital injection (PMN) into the
company, it said in a prospectus. The government received As of August, the contractor had finished construction of
an approval from the House of Representatives last year to several supporting facilities, such as a camp site, main
inject Rp 3.5 trillion into the company through the upcoming office, water intake facility and port and jetty. Meanwhile,
rights issue. the remainder of the proceeds from the rights issue would
be used as the company’s working capital. In late September,
No standby buyers had been appointed to buy the the company held an international roadshow in Malaysia,
unsubscribed shares if the investing public and the Singapore and Hong Kong to promote the offering. Tri
company’s board of directors, which own the remaining 35 expressed confidence that investors would welcome the
percent of the company’s shares, would not all exercise their rights issue.
rights, the company said.

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November 2015

Freeport’s share
divestment starts Oct. 14

- 9 October 2015 -

The Jakarta Post, Jakarta - The Energy and Mineral Currently, the Indonesian government owns only 9.36
Resources Ministry said that giant gold and copper miner percent of Freeport’s shares. As for the scheme of releasing
PT Freeport Indonesia would be able to offer its divestment Freeport’s shares on the stock market, it is not yet possible
shares starting from Oct. 14. since it has not been arranged in the regulation.

“After receiving the offer, the government will have 90 days “The current regulation is to release the shares to BUMN,
to negotiate with Freeport, regarding whether the price is BUMD or private entities,” said Bambang.
reasonable or not,” said the ministry’s director general for
minerals and coal, Bambang Gatot Ariyono, on Thursday as Previously, Indonesia Stock Exchange (IDX) president
quoted by tempo.co. director Tito Sulistio called on foreign entities that were
involved in Indonesia’s natural resources to be listed in the
According to Bambang, after evaluating the price, the stock exchange.
ministry would hand over the divestment technicalities to
the Finance Ministry. The government, through the Finance “Even though [they are] foreigners, they exploit Indonesia’s
Ministry, would later decide whether to buy the shares or natural resources. Please be listed [in the IDX] for [the sake
not. If the government is not interested, the shares will be of] all of us,” said Tito.
offered to state-owned enterprises (BUMN) and provincial
administration-owned enterprises (BUMD). According to Tito, IDX was currently surveying 16 foreign
entities, which included Freeport, Wilmar and Newmont.
The divestment scheme will be included in the Ministerial He urged the entities to divest their shares in IDX so that
regulation after the issuance of the revised Government Indonesia could at least gain benefits through taxes and
Regulation (PP) No. 77/2014 on implementation of minerals transactions in the stock exchange.
and coal mining business activities. Based on the policy,
Freeport is obliged to divest up to 30 percent of its shares “The impact is for the market’s index and capitalization,” said
since the company’s activities include underground mining. Tito.

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November 2015

Freeport’s future
remains uncertain
- 8 September 2015 -

The Jakarta Globe, Jakarta - Giant copper and gold mine to grant Freeport a new permit, as they claim it has only
corporation PT Freeport Indonesia has still not secured exploited Papuan soil since 1967. Even with the so-called
assurances of the future of its operations at Grasberg mine, “high-level agreement”, the future of Freeport Indonesia’s
Papua, although the company has renewed its commitment operation remains uncertain as the agreement is most
to continue investment in the country. likely only informal, according to international law expert
Hikmahanto Juwono.
Recently, Freeport renewed its investment commitment in an
agreement with the Energy and Mineral Resources Ministry. “The so-called high-level agreement isn’t actually known
and is likely similar to a gentlemen’s agreement. It is morally
“Freeport has made a high-level agreement to move binding. However, the government has to be careful with
forward with its investment plans without waiting for the such an agreement because the company could use it in
revised regulations we are currently working on. Only after international arbitration,” Hikmahanto said.
the revision process is completed will the company apply
for the extension of its operation,” he said, adding that the According to Hikmahanto, Freeport could challenge
agreement was made with the consent of President Joko the government through international arbitration if the
“Jokowi” Widodo. government ultimately decides not to extend the company’s
operations after 2021, while its investments have been
Sudirman was referring to the planned revision of a disbursed.
government regulation that stipulates that a request for a
mining operation extension can only be submitted two years “The government can no longer make policies without public
before the existing permit is set to expire. The ministry is opposition like the Soeharato’s years. Now we have people
planning to extend it to 10 years. The extension aims to give who closely monitor any policies,” he said.
certainty to companies long before a permit expires, to allow
companies to be more committed to their investment. Meanwhile, Energy and Mineral Resources Ministry’s mineral
and coal director general, Bambang Gatot Ariyono, said
Freeport Indonesia, a subsidiary of US-based Freeport the “high-level agreement” wouldn’t be referred to in the
McMoRan Inc., has a contract of work that will expire in planned amendment of Freeport Indonesia’s contract of
2021. Under existing regulations, any request for extension work.
of operations can only be made in 2019, when Jokowi is set
to leave office. “If the company believes in the government, please do,”
Bambang said.
Freeport, however, has been trying to obtain assurances of
the continuation of its operation in Grasberg, which is the The government is currently struggling to adjust numerous
largest gold mine in the world. Such certainty will safeguard contract of works held by mineral and coal mining companies.
massive investment in underground mining of around US$18 The adjustments, as mandated by the 2009 Mining Law,
billion and a smelter development of about $2 billion. are seen as necessary as the government is seeking bigger
benefits for its people from the mining activities from now
The situation is complicated as some sections of the public until the expiry of the contracts.
and several politicians have called on the government not

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November 2015

Freeport denied IPO request, Inalum expands capacity to

must give govt priority double production

- 12 October 2015 - - 16 October 2015 -

The Jakarta Post, Jakarta - State-owned aluminum maker

Indonesia Asahan Aluminum (Inalum) has allocated up to
US$2.5 billion to finance a number of projects in order to help
achieve a target of producing 500,000 tons of aluminum by
2020.

Among the projects are a new 200,000 ton capacity aluminum

smelter and a steam-fueled power plant (PLTU) as well as the
The Jakarta Post, Jakarta - The Energy and Mineral Resources expansion of Inalum’s designated port at Kuala Tanjung in
Ministry has refused giant copper and gold miner PT Freeport North Sumatra.
Indonesia’s request to conduct an initial public offering (IPO)
to comply with share divestment requirements for foreign Inalum president director Winardi Sunoto said that in order
mining companies. to accomplish the production target, Inalum would need
a minimum of 1 million tons of raw aluminum material to
process. Currently, the company’s top production capacity is
The ministry’s director general for minerals and coal,
at 250,000 tons.
Bambang Gatot Ariyono, said Freeport Indonesia must
follow the existing divestment mechanism, in which priority Regarding the projects, Winardi added that the power plant
for buying shares from the company must be given to the would break ground in 2016 and would take two to three
government. years to build, while the new smelter would be built later.
According to Winardi, Inalum is aiming to produce 255,000
“Divestment will not be conducted through an IPO, but by tons by the end of 2015, with a monthly production rate of
giving the government priority to purchase shares of the 21,000 tons this year.
company. We should follow this rule,” said Bambang to
thejakartapost.com on Tuesday. However, Winardi said his company would likely miss its
target to achieve $104 million in net income amid a slump in
commodity prices by 30 percent this year.
He further said that according to the existing regulation,
the priority to purchase foreign mining companies’ shares Meanwhile, Inalum signed a memorandum of understanding
went to the central government and provincial, regental with state-owned diversified miner PT Aneka Tambang
and municipal administrations. The second priority, he said, (Antam) on Thursday to jointly operate a smelter grade
went to state-owned enterprises and enterprises owned by alumina refinery (SGAR) in West Kalimantan. The
local administrations (BUMD) while the last priority would be memorandum solidified the formation of a joint venture
given to private companies. between the two companies, which will manage the
construction of the bauxite processing refinery.
Under government regulation (PP) No.77/2014 on mineral
and coal-mining business activity, Freeport must divest 10.64 The refinery, which is expected to begin operations in 2019,
will have a total production capacity of 2 million tons upon
percent of its shares to the government by Oct. 14. After
completion. Several foreign companies have been said to
accepting the offer, the government has 90 days to negotiate
be involved in the project, including from the United Arab
with Freeport. Emirates, Russia and China.

“We will consider their offer. It will be evaluated later to “Antam and Inalum’s joint venture formation is the second
decide if the share price is fair,” Bambang said. step taken after signing the official memorandum on the
project itself in July. The refinery will also increase the
Earlier, Freeport Indonesia expected to be allowed to value of Antam’s bauxite reserves through downstreaming
conduct an IPO to comply with the mandatory divestment practices,” Antam president director Tedy Badrujaman said.
regulation imposed by the government. The company’s
spokesperson Riza Pratama said divesting shares would be Antam’s bauxite reserves processed at the new refinery will
also enable Inalum to break free from depending on raw
more transparent and accountable that way.
aluminum imports. However, the joint venture will not be
included in Inalum’s five-year plan due to the project not
being a wholly Inalum venture.

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November 2015

Stainless steel industry

expected to grow big in five
years
- 12 October 2015 -

The Jakarta Post, Jakarta - The country’s stainless steel use of stainless steel on its domestic market, Deepak said.
industry could grow aggressively over the next few years Indonesia’s annual per-capita consumption of stainless steel
as demand from infrastructure projects is forecast to amounts to merely 0.6 kilogram, a far cry from the world’s
surge, according to the Indonesian Iron and Steel Industry average per-capita consumption of 5.5 kg, according to IISIA
Association (IISIA). estimates.

Rajesh Khosla, a member of IISIA, said on the weekend that The country has an annual stainless steel production
the national stainless steel industry would likely grow rapidly capacity of 150,000 tons, but currently produces only around
in the next five to seven years, driven by the growing use of 100,000 tons, according to IISIA data. That figure is far smaller
steel in infrastructure projects. than the country’s annual production of raw steel, which
amounts to some 4 million tons. Rajesh said the Indonesian
“It is estimated that infrastructure projects will consume stainless steel industry was currently focusing on developing
more stainless steel in the future,” he told The Jakarta Post. its domestic market, with only around 30 percent of the total
The government is currently urging all domestic industries output being exported.
to boost their output of downstream products made from
mineral resources and thereby add more value to their Meanwhile, the Trade Ministry’s acting director general
production. for foreign trade, Karyanto Suprih, urged local stainless
steel producers to boost their exports to Malaysia, as the
The administration of President Joko “Jokowi” Widodo aims neighboring country had recently stopped its antidumping
to implement a number of large-scale infrastructure projects, investigation on imported cold-rolled stainless steel.
ranging from energy production to transportation links.
The Malaysian government announced in a statement dated
Another member of the IISIA, Deepak Agarwal, said that Sept. 21 that it had ended its antidumping investigation on
unlike its neighbors, such as Thailand, Indonesia currently imported cold-rolled stainless steel from Taiwan, France,
used raw steel for many infrastructure projects that would Hong Kong, Japan, China, Finland, Indonesia, South Korea
actually be better served with stainless steel. and Vietnam as it had found no material injury from the
import activities.
Non-rusting stainless steel is commonly used for various
applications from eating utensils to water tanks. IISIA’s Rajesh said, however, that the termination of the
The material — which contains a minimum chromium content investigation would not necessarily boost Indonesia’s total
of 10.5 percent — is also used in a range of infrastructure stainless steel exports significantly, as only around 3 percent
projects, such as skyscrapers, bridges and monuments. of national production was currently shipped to Malaysia.

At present, Indonesia lags behind other countries in the

CARSURIN www.carsurin.com 12
Quality with Integrity
minerals
news

November 2015

Top Philippine Nickel Miner

Says Prices May Have Hit
Bottom
- 19 October 2015 -

Reuters, Manila - Global nickel prices may have hit bottom Chinese growth of between 6 percent and 7 percent should
and production cuts could hasten a recovery in the metal be enough to sustain the country’s stainless steel demand
that has lost nearly a third of its value this year, the CFO of at around current levels, maintaining appetite for Philippine
the Philippines’ top nickel ore miner said. nickel ore, he said. China on Monday reported third-quarter
economic growth of 6.9 percent, its slowest quarterly
“It’s likely that we’ve already seen the bottom this year, expansion since 2009.
so there could be potential upside next year,” Emmanuel
Samson, chief financial officer of Nickel Asia Corp, told the Samson said the Philippines could not fully meet China’s
Reuters Global Commodities Summit on Monday. demand for nickel ore, as it lacked big volumes of high-grade
material that Indonesia used to supply. Stocks of Indonesian
“It’s difficult to imagine that prices are sustainable at current ore in China, piled up just before the ban took effect, were
levels considering an estimated 60 percent of producers expected to be depleted by year-end.
are losing money today. Of course, if some producers cut
production that would definitely help prices recover faster.” “NPI producers in China will be completely dependent on
Philippine ore, which is not sufficient to cover NPI capacity.
The price of refined nickel, used to make stainless steel, has Chinese stainless steel producers would have to rely more
fallen 31 percent on the London Metal Exchange this year, on other sources of nickel such as ferronickel or pure nickel,”
reflecting weaker demand in top consumer China. said Samson.

The Philippines became the biggest supplier of nickel ore to Nickel Asia, partly owned by Japan’s Sumitomo Metal Mining
China after Indonesia banned shipments in January 2014. Co Ltd, is keen to acquire more assets, but is keeping its sights
Nickel ore is used to make nickel pig iron (NPI), a cheaper at home. The miner said in April it would acquire stakes in
substitute for refined metal in producing stainless steel. two smaller miners to expand its resource base by 24 percent.

Nickel ore miners are faring better than refiners, Samson “We are always on the lookout for new nickel properties
said, with current ore prices still higher compared to levels locally,” Samson said.
prior to the Indonesian ban. LME nickel has dropped about
30 percent to around $10,450 a tonne over the same period.

CARSURIN www.carsurin.com 13
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minerals
news

November 2015

Cement sales
have bright future
- 19 October 2015 -

The Jakarta Post, Jakarta - After poor sales in the first half Danareksa Sekuritas shared a similar view, saying that the
of the year, cement demand has started to pick up in the increases were likely driven by progress in the country’s
third quarter of the year, thanks partly to the country’s infrastructure projects.
infrastructure projects in which state-run cement giant
Semen Indonesia is expected to reap the most benefits from “Although it might be still too early to conclude, this could
the projects’ execution. reflect the impact of government infrastructure projects. As
such, we believe that demand for bulk cement will become
Data released by Indonesian Cement Association (ASI) on notably more robust going forward.”
Thursday showed that domestic cement consumption — a
parameter of economic growth in an emerging market — in Danareksa further emphasized that the improvement in
July-September reached 14.47 million tons, growing by 1.3 domestic cement sales had been supported by the execution
percent quarter-on-quarter (qoq) and 3 percent year-on-year of several toll road projects, mainly the trans Sumatra toll
(yoy). road project. Work has started for certain sections of the
Sumatra toll road, which will span 2,800 kilometers across
Growth was driven by yearly increases in August and the province and is expected to be fully operational in 2019.
September sales, which were booked after monthly cement
consumption consistently declined since February following “Considering that these projects are only in the initial phase
the slowing economy and the government’s sluggish with more infrastructure projects kicking off in the coming
infrastructure spending. months, we believe that cement demand will keep going up.”

The growth, as the data indicated, has helped trim yoy Data from the association showed notable monthly demand
declines in cement demand to 0.9 percent in the first nine growth in areas outside Java in September, especially in
months of the year, from previously 2.9 percent in the first Nusa Tenggara (19 percent), Maluku and Papua (8 percent)
half. Cement sales hit 42.58 million tons from January and in Sumatra (6 percent).
to September compared with 42.99 million tons in the
corresponding period last year. Although monthly cement sales in Java declined by 2 percent
in September, and the first nine months of demand in the
UOB Kay Hian said in a report that if monthly sales volume country’s most populous island slipped by 1.2 percent on
could be maintained above 5 million tons in the remaining annual basis, a number of projects — including the trans
three months of the year, domestic cement consumption Java toll road, public housing and irrigation projects — that
might hit 60 million tons by year-end, meaning that this are being prepared are expected to help boost demand in the
year’s cement demands would be at the same level with last region.
year despite its sluggish start.
“In view of government efforts to speed up infrastructure
“Another strong monthly sales in September shows that spending, we remain confident that demand in Java will start
cement demand is normalizing. Positive cement sales is to pick up given a number of major projects in the region,”
chiefly due to the government’s executions of infrastructure Danareksa said in their report.
projects, more property launchings, and a better economy in
the second half,” it said.

CARSURIN www.carsurin.com 14
Quality with Integrity
minerals
news

November 2015

A Freeport IPO would benefit Nickel prices may have

capital market: OJK bottomed out

- 19 October 2015 - - 20 October 2015 -

Manila Bulletin - Global nickel prices may have hit bottom

and production cuts could hasten a recovery in the metal
that has lost nearly a third of its value this year, the CFO of
the Philippines’ top nickel ore miner said.

“It’s likely that we’ve already seen the bottom this year,
so there could be potential upside next year,” Emmanuel
Samson, chief financial officer of Nickel Asia Corp, told the
The Jakarta Post, Jakarta - PT Freeport Indonesia will benefit Reuters Global Commodities Summit.
local capital market if permitted to conduct its obligatory
share divestment through an initial public offering (IPO), a “It’s difficult to imagine that prices are sustainable at current
Financial Services Authority (OJK) executive believes. levels considering an estimated 60 percent of producers
are losing money today. Of course, if some producers cut
production that would definitely help prices recover faster.”
The commissioner for capital market supervisor at OJK,
Nurhaida, said that the IPO would be a good opportunity for
The price of refined nickel, used to make stainless steel,
Indonesians to own shares of the US-based mining company. has fallen 31 percent on the London Metal Exchange this
year, reflecting weaker demand in top consumer China. The
“A company with great value in the capital market would Philippines became the biggest supplier of nickel ore to China
increase its market capitalization significantly,” said after Indonesia banned shipments in January 2014. Nickel
Nurhaida in Jakarta. ore is used to make nickel pig iron (NPI), a cheaper substitute
for refined metal in producing stainless steel.
By conducting an IPO, Nurhaida said, Freeport would be
listed on the Indonesia Stock Exchange (IDX), and as a listed Nickel ore miners are faring better than refiners, Samson
company, the giant gold and copper miner would have to said, with current ore prices still higher compared to levels
prior to the Indonesian ban. LME nickel has dropped about
adhere to good governance.
30 percent to around $10,450 a ton over the same period.
Chinese growth of between 6 percent and 7 percent should
“As a public company, the performance of Freeport Indonesia be enough to sustain the country’s stainless steel demand
would be being monitored and supervised by the OJK,” at around current levels, maintaining appetite for Philippine
she asserted. She added that the government had not yet nickel ore, he said.
decided how to set up the divestment scheme.
China on Monday reported third-quarter economic growth
According to Nurhaida, if the divestment is done through of 6.9 percent, its slowest quarterly expansion since 2009.
an IPO, the government would have to revise Government Samson said the Philippines could not fully meet China’s
Regulation (PP) No. 77/2014. Earlier, Finance Minister demand for nickel ore, as it lacked big volumes of high-grade
Bambang Brodjonegoro claimed to have talked with the material that Indonesia used to supply. Stocks of Indonesian
ore in China, piled up just before the ban took effect, were
Energy and Natural Resources Minister Sudirman Said on
expected to be depleted by year-end.
this issue.
“NPI producers in China will be completely dependent on
Under PP No. 77/2014 on mineral and coal-mining business Philippine ore, which is not sufficient to cover NPI capacity.
activity, Freeport must divest 10.64 percent of its shares to Chinese stainless steel producers would have to rely more
the government by Oct. 14. After accepting the offer, the on other sources of nickel such as ferronickel or pure nickel,”
government has 90 days to negotiate with Freeport. said Samson.

Freeport Indonesia, a subsidiary of US-based giant Freeport Nickel Asia, partly owned by Japan’s Sumitomo Metal Mining
McMoRan Inc., intends to meet the government’s requirement Co. Ltd., is keen to acquire more assets, but is keeping its
that it divest 30 percent of its shares to Indonesian parties. sights at home. The miner said in April it would acquire
stakes in two smaller miners to expand its resource base by
The share divestment is part of a deal between the company
24 percent. “We are always on the lookout for new nickel
and the government as they re-negotiate Freeport’s contract
properties locally,” Samson said.
of work (CoW) as mandated by the 2009 Mining Law.

CARSURIN www.carsurin.com 15
Quality with Integrity
minerals
news

November 2015

Inalum, Antam encouraged Inalum to Go Public, Targets

to buy Freeport shares US$500M Proceeds

- 20 October 2015 - - 22 October 2015 -

The Jakarta Post, Jakarta - State-Owned Enterprises (BUMN)

Minister Rini Soemarno is set to encourage state-owned
aluminum maker PT Indonesia Asahan Aluminium (Inalum)
and state-owned diversified miner PT Aneka Tambang
(Antam) to purchase shares as part of PT Freeport Indonesia’s
upcoming share divestment.

“The ministry is currently conducting detailed calculations

and analysis to see how Inalum should join in Freeport’s
share divestment,” said Rini in Jakarta on Monday as quoted Tempo.co, Jakarta - PT Indonesia Asahan Aluminium (Inalum)
by Antara news agency. is planning to hold an initial public offering (IPO) in 2018. The
company is targeting to gather Rp6.8 trillion (around US$500
According to Rini, the BUMNs were financially ready to million) from the IPO.
increase the government’s shares in Freeport thanks to the
full support of state-owned banks such as Bank Mandiri, BRI Inalum finance director Oggy Achmad Kosasih, said that
and BNI. most of the proceeds will be spent on the construction of a
2x350MW steam power plant.
“We feel that Inalum should join in since it doesn’t yet own
any mines and thus can hopefully serve as an effective Oggy also said that the proceeds will be allocated to finance
Freeport shareholder,” said Rini. She added that the banks capacity upgrade of the company’s smelter from the current
would certainly be eager to support [the plan] since Inalum 260,000 tons to 500,000 tons.
had very strong finances and Freeport was of great strategic
value. “We also need plenty of funding for the downstream segment,
as we have a cable factory project, machinery block. We also
“Other than domestic companies, international financial plan to increase the length of our pier,” Oggy said.
institutions will definitely compete to help fund the purchase
as well,” said Rini. Through the IPO, Oggy said, Inalum aims to boost the
company’s share in the domestic aluminum market, currently
Antam, which currently focuses on a smelter-grade alumina being dominated by imported products. Right now, Inalum
refinery in Mempawah, West Kalimantan, is considered a has a cash of US$400 million and an asset worth of US$1.1
strong and effective partner for potentially assisting Inalum billion.
to take purchase a slice of Freeport. Rini added that the
ministry was currently completing a study on the share
divestment.

“[We expect] the study will be completed before the end of

October. We will soon submit a proposal to the Energy and
Mineral Resources Ministry,” said Rini.

Under PP No. 77/2014 on mineral and coal mining business

activity, Freeport must divest 10.64 percent of its shares to
the government by Oct. 14, to bring Indonesian ownership of
the company up to 20 percent. After accepting an offer, the
government has 90 days to negotiate with Freeport.

CARSURIN www.carsurin.com 16
Quality with Integrity
November 2015

Tips of
the Month

Reserves and Resources – Underground

Last month we discussed Non–JORC techniques for If a block is to be mined by longwall shearer cutting a face
estimating open cut Reserve tonnages derived from Resource of thickness of say 2.5m, 0.5m might be left in the floor and
figures. In this “Tips”, we will look at underground situations 1m might be left in the roof. Thus only 62% of the available
for use internally. For a potential u/g mining operation the coal in that seam will be mined from the block area available.
Non–JORC estimated Reserve assessment is more difficult. As well an estimate might be developed for mining with a
continuous miner in a ‘room and pillar’ situation. Ultimate
This is best left to a coal-mining engineer, however in an RoM recoveries might only be 40-80% of available resource in
emergency the following procedure might be followed. The that block on a first pass basis. Deduct 10% for losses during
geologist must prepare as good as possible map of the seam mining processes.
or seams to be mined showing concession boundaries, lox
line, any old workings known/identified, fault lines, water If the Run of Mine tonnages are to be treated in a coal
courses, provincial roads, pipelines, buildings. preparation or Washery Plant then the estimated Recovery
percentage (derived from similar operations near by in
Country Mining Regulations will state minimum distances same seams) must be factored into the final “Run Of Plant
not to be mined either side of concession boundaries, old “ Reserve tonnages. However don’t forget that the washery
workings, faults and within the “shadow” of overlying ground behavior of the same seam “next door” may not be exactly
features projected onto the seam below, minimum recovery the same as might prove to be the case from the same seam
allowed. From this can be developed the area and hence in your concession – and certainly not if it is a different seam.
volume/tonnage. The amount of coal actually recovered will
depend on the type of mining envisaged eg longwall, “room
and pillar”. The vertical distance between seams under
consideration for mining is also important.

Tips
Let us say that we are looking at a single 4 m thick seam
of flat lying aspect with a fault running through the area.
No outcrop of seam in concession. Plot in pillars to be left
surrounding concession boundaries (say 20m) and fault Antony H. Osman
zones (say 50m either side). This will give an idea of available FAusIMM (CP) MMICA MAIMVA (CMV) FGS
blocks and resources tonnages available for ultimate mining. JORC and KCMI accredited
Use a digital electronic measuring device for areas and hence Senior Geological Adviser
volumes. Estimate tonnages on a block-by-block basis. A member of PERHAPI, IAGI & MGEI

*****************
This article is a non-JORC assessments and figures.
For a non-obligatory discussion of all your coal deposit exploration and evaluation matters, for expert opinions on the
content and presentation of your company’s report, please contact: [email protected] or [email protected]
at the CARSURIN Coal and Minerals Division.

CARSURIN www.carsurin.com 17
Quality with Integrity
November 2015

Australasia December 2015 Public Holidays

Australia Indonesia India

25-28: Christmas Holiday 9: Regional Election Day -
24: The Prophet Muhammad’s Birthday
25: Christmas Day

China Japan Singapore

- 23: Emperor’s Birthday 25: Christmas Day

Hong kong Thailand South Korea

25: Christmas Day 4: Father’s Day Observed 25: Christmas Day
26: Boxing day 5: The King’s Birthday
7: The King’s Birthday Observed
10: Constitution Day
31: New Year’s Eve

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