Indonesian miner expands and diversifies

Bumi Resources, an Indonesian coal mining company, on Monday outlined an aggressive expansion and diversification agenda two days after agreeing to sell 30 per cent of its two main assets to India’s Tata Power for at least $1.3bn.

Bumi, Asia’s third-largest coal company, said it would increase coal production at its Kaltim Prima Coal and Arutmin mines from 53.5m tonnes last year to 60m tonnes this year and at least 90m tonnes by 2009. It also plans to invest up to $1bn to bring on stream two copper and gold mines it bought from BHP Billiton and Rio Tinto on Sulawesi island in eastern Indonesia in 2005.

BHP Billiton sold the mine in Gorontalo, north Sulawesi, for $2m after spending $27m on exploration there and Rio Tinto sold its mine near Palu, in Central Sulawesi, for $800,000 after spending $8m on it.

“They were – and still are – very good resources,” said Michael Chambers of CSLA in Jakarta.

“They weren’t sold because they lacked potential.” Production at the two sites would begin in 2010 at the earliest, said Kenneth Farrell, a Bumi director.

Dileep Srivastava, Bumi’s head of investor relations, said the group planned a domestic acquisition programme. That could begin with Bumi buying the 3 per cent stake a Newmont subsidiary has to divest from its Batu Hijau gold mine on Sumbawa island, also in eastern Indonesia.

Overseas, the company hopes to develop an iron ore asset in Mauritania and is exploring further co-operation with the Tata Group after the latter agreed to buy 30 per cent of Arutmin and KPC.

“We want to diversify our current single-commodity revenue stream,” Bumi said. “We would like to balance our risk profile as a diversified mine and energy company.”

Bumi’s shares have risen 47 per cent this year on rising coal prices, increasing demand for low-grade coal to fuel power projects, and also on the expectation of a divestment deal.

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