Coal mining contractors and their operations.
Overview of coal mining industry
Involvement of the private sector especially foreign investors in coal mining began in Indonesia early 1980 when the government of the country invited foreign investors to develop coal reserves especially in Kalimantan.
Rapid development began of the country's huge coal reserves after the involvement of the private sector including foreign and domestic investors. Hundreds of contracts under the Contract of Work (KK) scheme--from Generation I to Generation IV and Coal Mining Development Agreement (PKP2B) have been signed over the past three decades.
Large numbers of heavy equipment sets are used in coal mining in the process of removing soil and drilling as well as transport of coal. The mining sector, therefore, is the largest user of heavy equipment in the country. The types of heavy equipment used in coal mining are mining trucks, excavators, etc.
The brisk development in coal mining has pushed up demand for heavy equipment. In Indonesia, heavy equipment is used by coal mining companies or coal concession holders as well as coal mining contractors.
Coal Mining Areas
The main coal mining areas in the country are Kalimantan and Sumatra. In Kalimantan, coal reserves are found in the provinces of East Kalimantan and South Kalimantan. In Sumatra, coal reserves have been found in West Sumatra, South Sumatra and Bengkulu.
East Kalimantan is the largest producer among the provinces accounting for around 55.4% or 406.6 million tons of the country's total production of 773.4 million tons of coal in the 2004-2009 periods. The second largest producer is South Kalimantan contributing 38.8% or 284.7 million tons to the total production in the same period.
Sumatra has small contribution. South Sumatra contributed 5.7% or 41.6 million tons and Bengkulu 501,000 tons or 0.1% of the total production in the same period.
The country's coal production has continued to increase in the past several years. In 2005, the production was recorded at 142. 3 million tons. In 2006, the production surged 20.8% to 171.8 million tons--or the highest growth in the past several years. The production grew further by 10.1% to 193.5 million tons in 2008 and by 17.6% to 227.2 million tons in 2009.
The production was boosted by booming in coal market. Coal came as a cheap and most easily available alternative source of energy amid the soaring prices of crude oil lately.
Open pit mining dominates coal mining systems
Open pit mining is the only system used for coal mining in Indonesia because of the position of the coal reserves. Open pit mining needs heavy equipment like excavators, bulldozers, loaders and dump trucks of large size.
Prospects of business in coal mining still encouraging
The prospects of business in coal mining in Indonesia are very encouraging as the country still has large coal reserves yet untapped.
Meanwhile demand for coal as a source of alternative energy amid the soaring price of oil is growing. In Indonesia , coal is growing in demand especially to feed coal-fired power plants. The country is building coal-fired power plants with a total capacity of 10,000 megawatts under its first fast rack development program in the electricity sector.
Major coal mining companies
There are 60 companies operating in coal mining industry, but production is dominated by 7 producers. The 7 producers accounted for 70.4% or 160.3 million tons of the country's total production 227.5 million tons in 2009.
The seven companies are PT. Adaro Indonesia, PT. Kaltim Prima Coal (KPC), PT. Kideco Jaya, PT. Arutmin, PT. Berau Coal, PT. Indominco, and PT. Pertambangan Bukit Asam (PTBA). Adaro was the largest producer with production of 40.6 million tons in 2009, followed by Kaltim Prima Coal (KPC) with production of 38.1 million tons, Kideco with production of 24.7 million tons.
PT. Adaro Indonesia
Adaro has the world's largest single coal mine. Its coal mines are located in Tabalong and Balangan, in South Kalimantan with reserves of 3.4 billion tons (JORC Compliant).
Adaro is a holder of contract of work (CoW) of the generation I valid until 2022. Its production capacity was 48 million tons / year in 2009 including 16.4 million tons of its subsidiaries PT. Saptaindra Sejati (SIS), which operates mainly in as coal mining contractor. PT SIS has the capacity to remove 115 million cubic meter of overburden and has 6 clients among coal concession holders in South and East Kalimantan including Adaro.
Adaro's coal production totaled 40.6 million tons in 2009, up from 38.5 million tons in 2008.
Adaro plans to increase its annual production to reach 80 million tons in 2014. It has 37.8 kilometer over land conveyor with a transporting capacity of 40 million tons of coal per year.
Adaro through its subsidiary PT. Alam Tri Abadi plans to acquire 25% stake in each of 7 Indonesia Coal Projects (ICP) in Maruwai from Australia'sw BHP Billitons. The acquisition is estimated to cost US$ 335 million. Adaro will cooperate with BHP Billitons which retains a 75% stake in developing the 7 coal mines in Maruwai, Kalimantan.
The seven projects are PT Maruwai Coal, PT Juloi Coal, PT Kalteng Coal, PT Source Barito Coal, PT Lahai Coal, PT Ratah Coal and PT Pari Coal.
PT. Kaltim Prima Coal
In 1978, the Indonesian government began to invite bidders among foreign investors to development and exploit coal reserves in the country offer investment. A consortium of British Petroleum and Rio Tinto was awarded a concession of 7,900 hectares in 2 blocks along the eastern coasts of Kalimantan.
PT. Kaltim Prima Coal is one of coal mining companies in East Kalimantan owned by PT. Bumi Resources. KPC was acquired by Bumi from British Petroleum and Rio Tinto on 10 October 2003.
PT. Kaltim Prima Coal was established by the consortium of British Petroleum and Rio Tinto in 1982 with share split of 50% each. KPC holds the Contract of Work (CoW) over a concession of 90,706 hectares.
Its coal mines are located at Sangatta Block and Bengalon Block in the regency of Kutai Kartanegara, East Kalimantan. The blocks have a reserve of 4.5 billion tons including 3.6 billion tons in the Sangatta Nlock and 871 million tons in the Bengalon Block.
In that location there are a number of mining sites handled by KPC and mining service contractors. The Bengalon Block is developed by mining service contractor PT. Dharma Henwa.
Currently there are nine open pit mines in operation including 4 by KPC and 5 by contractors.
The types of equipment used by KPC include 190 units of haul trucks (138 OB trucks and 52 Coal trucks), 35 shovels/ backhoes (22 OB diggers and 15 Coal diggers) and around 200 units of other mobile equipment. The capacity of the haul trucks ranges from 80 tons to 360 tons and that of shovels is up to 33 cubs m. KPC also uses a number of equipment sets rented from contractors.
KPC's coal production in 2009 reached 38.1 million tons, up 16.8% from the previous year.
PT. Kideco Jaya Agung
PT Kideco Jaya Agung was established in 1982 in Indonesia by a consortium including Samtan from South Korea. Kideco produces coal from Paser, in East Kalimantan. This company secured a coal concession with a Contract of Work in 1982 for 30 years as from the date it started commercial production in 1993.
The 50,400 hectare concession includes Roto area 27,430 hectares, Samu 7,880 hectares, Susubang 9,000 hectares, and Pinang Jatus 6,090 hectares. The concession has a total reserve of around 1 billion tons of coal including 420 million tons in Roto (including Roto Utara and Roto Selatan); 494 million tons in Samu and 65 million tons in Susubang.
Kideco has an annual production capacity of 22 million tons. In 2008 its production reached 22 million tons or 11% of him country's total production that year.
Kideco secured the operation and production license from the Coal Directorate General in 1993 to operate in area Roto Utara. In 1997 , he CoW of Kideco was implemented in cooperation with PT. Tambang Batubara Bukit Asam (PTBA).
Coal production from Roto Selatan started in 1997. The production continued to increase to reach a total of 22 million tons in 2008. The production grew faster since mid 1990s from 2 million tons to reach 22 million tons per year at present after expansion four times. The coal production of Kideco has been exported to 16 countries with 36 end users.
The process of production is handled largely by contractors. The process of removing overburden in Roto Utara was handled by PT. Sims, and in Roto Selatan by PT. PAMA and PT. BUMA.
Currently Kideco is 49% owned by Samtan, Co. Ltd, 46% by INDIKA Group and 5% by PT. Muji Inti Utama.
PT. Arutmin Indonesia
PT. Arutmin Indonesia secured the CoW from the government of Indonesia to operate in 6 Block in Kalimantan. The 6 Block covers narrow track in southeast Kalimantan and northern end of Pulau Laut.
The 6 Block lies in 3 regencies--Tanah Laut, Kota Baru, and Tanah Bumbuh. Among the coal mines of Artumin are Asam-asam, Batulicin, Mulia, Satui, and Senakin.
Arutmin Indonesia supplies coal for the state electricity company Perusahaan Listrik Negara (PLN) under its 10,000 megawatt fast track program. Under a contract Arutmin is to provide 10 million tons of coal a year starting 2010 to feed the coal-fired power plants of PLN.
In 2009, the coal production of Arutmin reached 19.3 million tons up 8.5% from 2008. In r 2010, PT. Arutmin hopes to boost production to 24.3 million tons including 13.76 million tons of bituminous coal and 10.58 million tons of sub-bituminous coal. Arutmin also exports part of its coal production.
Mining in Senakin and Satui fields is handled by contractor PT. Thiess Contractors Indonesia.
Currently Arutmin is 70% owned by Bumi Resources and 30% by TATA Energy. PT Bumi acquired Arutmin from BHP Billiton in 2001 and Tata acquired the 30% stake in 2007 from Bumi.
PT. Berau Coal
PT. Berau Coal was established in 1983. It is one of the CoW holders of the first generation. PT. Berau Coal was a joint venture between PT. Armadian Tritunggal (51%) and Rognar Holding B.V (39%), a Netherlands company and Sojitz Corp. (10%) a Japanese company.
PT Berau Coal secured the CoW from the government in 1983 with mining areas in northern part of East Kalimantan called Berau. The concession covers a total area of 1,200 hectares consisting of 6 areas.
Coal production of Berau comes from a number of areas in its concession including Lati (1994), Binungan (1996) and Sambarata (2001). The proven reserve in Lati totals around 745 million tons, and in Binungan of blocks 1-4 and blocks 5-7 totals 300 million tons. Meanwhile, explorations are still in progress in Kelai and Punan areas to determine the strength of the reserves.
The mining systems in all areas in the concession of Berau Coal are open pit mining using trucks, excavators, loaders and bulldozers to remove the overburden and mine the coal. The mining is handled by a number of contractors.
Perusahaan Tambang Batubara Bukit Asam (PTBA)
The company dates back to the Dutch colonial time with an embryo starting operating in 1919 in open pit mine.
The asset was confiscated by the government of Indonesia after his country gained independence and put the mine under PN Tambang Batubara Bukit Asam. In 1981, the company was renamed PTBA.
PTBA has a concession of 90,702 hectares consisting of a number of areas Tanjung Enim covering a total area of 66,414 hectares, Ombilin 3,950 hectares, Peranap /Cerenti 17,100 hectares, and IPC 3,238 hectares. The concession has a total reserve of 7.29 billion tons, with proven reserves of 1.99 billion tons. The largest reserve is found in Tanjung Enim, South Sumatra reaching 1.59 billion tons.
The installed production capacity of PTBA is 20 million tons per year. In 2010, PTBA plans to produce 10.8 million tons of coal, up 4.8% from 2008.
Overview of coal mining contractors
Mining work at coal mines in Indonesia is largely handled by contractors. Coal mine concession holders hand over the work to contracts for cost efficiency saving them from buying expensive heavy equipment.
Contractors offering mining service in coal sector are generally experienced in heavy equipment operations. Among them are subsidiaries of heavy equipment distributors or plantation companies such as PT. Pama Persada Nusantara, which a subsidiary of PT. United Tractors Indonesia, the sole agent for Komatsu heavy equipment; PT. Bukit Makmur Utama Mandiri, which was formerly a contractor opening plantation areas using many units of Hino trucks.
Mining contractors are the main users of heavy equipment. Coal mine concession holders have relatively few units of heavy equipment.
Currently there are 116 companies operating as mining contractors in Indonesia. They offer heir services to 60 coal producers. Among the main contractors are PT. Darma Henwa, Tbk, PT. Pama Persada Nusantara, PT. Thiess Contractors Indonesia, and PT. Bukit makmur Utama Mandiri.
Profiles of major Coal Mining Contractors
PT. Dharma Henwa, Tbk
PT Darma Henwa Tbk is general mining contractors established in 1991 with the domestic investment (PMDN) facility. In 1996 its status changed into PMA with Henry Walker Group Ltd. (Australia) took over the majority shares.
In May 2010, the shareholders of Darma Henwa included Zurich Asset International Ltd (18.31%), Goldwave Capital Limited 17.68%, and investing public 64.01%.
In 2009, its coal production totaled 6 million tons , down slightly from 6.1 million tons in 2008. The total production in 2009 included 4.8 million tons from Bengalon, down from 6 million tons in 2008; and 1.2 million tons from Asam-asam.
The company reported net income at US$201 million in 2009, down from US$ 220 million in 2008. Its equity fell 1.4% from US$ 278 million in 2008 to US$ 274 million in 2009. Its financial report showed that it posted a net loss of US$ 3.49 million in the first quarter of 2010, as against a net profit of US$ 2.29 million year-on-year.
Until 2009, PT Darma Henwa Tbk handled and completed a number of mining projects including Petangis project in South Kalimantan, Lerokis project on the island of Wetar, gold mining project on the island of Wetar, nickel mining in Maluku, Danau Wanagon and tunnels in Papua, diversion of the Kelian river in East Kalimantan, copper mining in Batu Hijau on the island of Sumbawa and coal mining in Busang and Pondok Labu in East Kalimantan
Darma Henwa has a number of units of heavy equipment including excavators, dump trucks, bulldozers, loaders and graders with brands of Hitachi, Komatsu, Caterpillar, Liebherr, and Terex.
Equipment used in mining by PT. Darma Henwa includes excavation, haulage, and support mining equipment. The excavators consist of a number of brands including Hitachi, Liebherr, Komatsu and Caterpillar ; the haulage trucks include Komatsu, Liebherr, Terex, and Caterpillar; the supporting equipment units include Komatsu, Liebherr and Caterpillar.
In early 2010, PT. Darma Henwa planned to hand over the mining job to sub contractor PT Bukit Makmur in the coal mine of PT Kaltim Prima Coal (KPC).
PT. Pama Persada Nusantara (PAMA)
Pama Persada (PAMA) is a wholly owned subsidiary of heavy equipment distributor PT. United Tractors Tbk. Currently Pama also has own subsidiaries-- PT Kalimantan Prima Persada (KPP) and PT Prima Multi Mineral (PMM).
KPP is a coal mining contractor and PMM is a joint venture with PD Baramarta having coal concession under the Coal Mining Agreement (PKP2B) of the third generation. KPP also handles mining work for a number of companies owned by Pama , which have coal concessions such as PT. Nusantara Citra Jaya Abadi, PT. Kadya Caraka Mulia and PT. Eka Satya Yanatama.
Coal production of PAMA has continued to scale up in the past several years. In 2008 its coal production reached 59 million tons and overburden removal totaled 442 million bcm. Its coal production rose to 68 million tons in 2009 with overburden reaching 597 million bcm.
Among the clients of PAMA include KPC, PTBA, Kideco Jaya, Adaro and Indominco. In early 2009, PAMA signed a 10-year coal mining cooperation with Kideco Jaya. It was a continuation of a previous 5-year agreement. The new contract was valued at US$ 3 billion bringing the total value of the contracts with Kideco including the previous one to US$ 3,3 billion.
PT Thiess Contractors Indonesia
PT Thiess Indonesia started operation in 1972 as a subsidiary of Thiess Bros Pty Ltd. This business unit was acquired by acquired by other company , therefore, it was reestablished in 1988. This company secured its first coal mining contract in 1988 from BHP Billitons for the Senakin coal mine of BHP Billiton in Kalimantan.
So far Thiess has handled only open pit mining using equipment such as trucks, shovels, draglines, bulk dozing, and high wall mining.
Among the projects being handled by Thiess include in coal mines of PT. Teguh Sinar Abadi (TSA) and Firman Ketaun Perkasa (PT Bayan Resources Group), coal mine in Sangatta of KPC, coal mine in Satui and Senakin in South Kalimantan owned by PT. Arutmin. Among projects already completed by Thiess included coal mine in East Kalimantan of PT. Kideco Jaya.
PT. Bukit Makmur Utama Mandiri (BUMA)
BUMA was established in 1988 by the Johan Lensa family. Before starting business as coal mining contractor, the company operated as contractor building oil palm plantations. Among the oil palm plantations already developed by the company included those of the Astra and Salim Groups. BUMA uses many Hino trucks.
Currently the shareholders of Bukit Makmur include PT Delta Dunia Makmur Tbk which acquired 99.99% of the shares of BUMA from PT Bukitmakmur Widya and Johan Lensa on 6 November 2009.
In the first half of 2010, PT Delta Dunia Makmur Tbk invested Rp 1.06 trillion in BUMA. PT Delta Dunia Makmur plans to invest up to US$ 180 million in heavy equipment this year.
This year, BUMA is set to increase its overburden removing capacity and coal mining by 10%-20%. In 2009, coal production under its contract totaled 32.8 million tons and removed 278 million bcm of overburden. Its EBITDA in he first half of 2010 was Rp 954 billion its clients include PT. Berau Coal, Adaro and Kideco Jaya.
Table - 1 Coal production by areas , 2009 Areas Volume production Share (%) (tons) Sumsel 11.422.723 5,90 Kalsel 69.798.665 36,00 Kaltim 112.737.497 58,10 Bengkulu 22.736 0,01 Total 193.981.621 100,00 Source: Directorate general of mineral, coal and geothermal, Data Consult Table - 2 Indonesia's coal production, 2005 - 2010* Year Production Growth (tons) 2005 142.287.451 - 2006 171.819.456 20,8% 2007 175.851.387 2,3% 2008 193.565.493 10,1% 2009 227.539.734 17,6% 2010 * 121.193.644 - Note: *) First semester of 2010 Source: Directorate general of mineral, coal and geothermal Table - 3 Production of major coal producers, 2009 Production 2009 Share Company (tons) (%) Adaro 40,590,189.00 17.8 KPC 38,154,491.00 16.8 Kideco 24,692,299.00 10.9 Arutmin 19,298,463.00 8.5 Berau 14,336,892.00 6.3 Indominco 12,396,126.00 5.4 Bukit Asam 10,830,700.00 4.8 Sub total 160,299,160.00 70.4 Indonesia's total production 227,539,734.00 100 Source: Data Consult Table - 4 KPC's coal reserves per 31 December 2005 Proven reserves Indicated reserve TOTAL Area (million tons) (million tons) Sengata 621 3,020 3,641 Bengalon 165 706 871 Total 786 3,726 4,512 Source: KPC Table - 5 Locations of coal mines, concessions and reserves of PTBA Areas Locations (hectares) Reserves (tons) Tanjung Enim 66.414 Resources: 6,36 billion Proven : 1,59 billion Ombilin 3.950 Resources: 0,1 billion Proven : 0,02 billion Peranap / Cerenti 17.100 Resources: 0,79 billion Proven : 0,37 billion IPC 3.238 Resources: 0,045 billion Proven : 0,01 billion Total 90.702 Resources: 7,29 billion Resources: 1,99 billion Source: PTBA Table - 6 Number of companies using heavy equipment Main users of heavy equipment Number of Companies Coal Mining Companies 60 Contractors 112 Source: Data Consult Table - 7 Projects of coal mining services handled by PT. Darma Henwa 2010 Clients Locations Volume Value (US$) Period PT. KPC Bengalon Batubara: 9 1.8 billion 2004 - million 2014 tons/year Overburden: 45 million bcm PT. Arutmin Asam Asam 2.1 billion 2007 - Indonesia 2027 Source: Annual Report of PT. Dharma Henwa 2009, Data Consult Table - 8 Units of mining equipment used by PT. Darma Henwa Types of equipment Brands and capacity Mining excavation * 2 x EX5500 FS Hitachi Excavator (550 tonnes) * 3 x O&K RH340 Excavator (550 tonnes) * 2 x EX5500 FS Hitachi Excavator (550 tonnes) * 2 x O&K RH200 Excavator (500 tonnes) * 5 x O&K RH120 C/E Excavator (250 tonnes) * 2 x Liebherr R994 Excavator (250 tonnes) * 2 x Komatsu PC1600 Excavator (160 tonnes) * 1 x Liebherr R984 Excavator (100 tonnes) * 5 x Caterpillar 245 Excavator (45 tonnes) Mining haulage * 5 x Komatsu HD1500-5 Dump Truck (240 tonnes) * 17 x Liebherr T262 Dump Truck (240 tonnes) * 10 x Terex MT4400 Dump Truck (240 tonnes) * 6 x Komatsu 630E Dump Truck (170 tonnes) * 5 x Terex MT3300 Dump Truck (150 tonnes) * 5 x Komatsu HD785 Dump Truck (100 tonnes) * 6 x Caterpillar 777 Dump Truck (100 tonnes) * 100 x Cat 777A Dump Truck (80 tonnes) Mining support * 1 x Komatsu D475 Dozer * 1 x Komatsu D375 Dozer * 2 x Caterpillar D11R Bulldozers * 4 x Caterpillar D10R Bulldozers * 4 x Caterpillar D9 Bulldozer * 2 x Caterpillar 16 H Graders * 2 x Caterpillar 980 Loaders * 1 x Caterpillar 14 Grader * 1 x Caterpillar 854 RT Dozer * 2 x Caterpillar 834 RT Dozer * 1 x Komatsu PC400 * 1 x Liebherr R974 * 1 x 245KS Drill * 1 x D45KS Drill * 2 x D55SP Drills Types of equipment Brands and capacity Mining support * 4 x Cat 825 Compactors * 2 x Cat IT 62 Tool Carriers * 1 x Cat 988Tyre Handler * 15 x Caterpillar 992C/G Loaders Source: PT. Dharma Henwa Table - 9 Project handled by PAMA effective in 2010 Clients Locations Volume of work KPC Sangatta, East 6.6 million tons/ Kalimantan year PTBA Tanjung Enim, South 3 million tons / Sumatra year Indominco Bontang, East 9 million tons/ Kalimantan year Kideco Jaya Agung Kajang Batu, East 6 million tons Kalimantan of coal/y and overburden 40 million bcm Adaro 18 million tons/year Tanjung Alam Jaya Tapin, South 1.5 million tons/ Kalimantan year Jembayan Muarabara Tenggarong, 4 million tons/year Baramarta Rantau Bakula, South 3 million tons/year Kalimantan Batu Gunung Mulia Tapin, South 2 million tons/year Kalimantan Hasnur Coal Project (Bumi Tapin, South 2 million tons/year Rantau Energy and Hasnur Kalimantan Coal Terminal) Clients Period KPC 2001 - Now PTBA 1993 - Now Indominco 1996 - Now Kideco Jaya Agung 2002 - Now Adaro Tanjung Alam Jaya 2004 - Now Jembayan Muarabara 2004 - Now Baramarta 2006 - Now Batu Gunung Mulia 2005 - Now Hasnur Coal Project (Bumi 2003 - Now Rantau Energy and Hasnur Coal Terminal) Source: PAMA Table - 10 Coal mining projects handled by Thies Contractor Indonesia Clients Location Volume of work PT. Teguh Sinar Abadi Melak, East Mining: 3,2 million tons/year (TSA) dan Firman Kalimantan Ketaun Perkasa (PT Overburden: 40 million Bayan Resources bcm/year Group) PT. Kaltim Prima Coal Sangatta, East Mining: 15 million tons/year Kalimantan Overburden: 105 million bcm PT. Arutmin Indonesia Satui, South Mining: 10 million tons/year Kalimantan Overburden: 64 million bcm PT. Arutmin Indonesia Senakin, South Mining: 5 million tons/year Kalimantan Overburden: 50 million bcm Kideco Kaltim Mining: 250.000 tons/ bl Overburden: 130 million bcm Clients Location Value (US$ million) PT. Teguh Sinar Abadi Melak, East (TSA) dan Firman Kalimantan 841 Ketaun Perkasa (PT Bayan Resources Group) PT. Kaltim Prima Coal Sangatta, East Kalimantan 835 PT. Arutmin Indonesia Satui, South Kalimantan 937 PT. Arutmin Indonesia Senakin, South Kalimantan 515 Kideco Kaltim 205 Clients Location Period PT. Teguh Sinar Abadi Melak, East 2008 - 2013 (TSA) dan Firman Kalimantan Ketaun Perkasa (PT Bayan Resources Group) PT. Kaltim Prima Coal Sangatta, East 2003 - 2020 Kalimantan PT. Arutmin Indonesia Satui, South 2000 - Now Kalimantan PT. Arutmin Indonesia Senakin, South 2000 - Now Kalimantan Kideco Kaltim 1993 - 2003 Source: PT. Thiess Contractor Indonesia