In response to growing demand for high-quality coal, Australiaâ€™s Exergen has made plans to open a facility in Indonesia that could produce up to 12 million metric tons of high-quality coal annually from poor-grade local material.
The move comes as companies compete to develop technology that can transform brown or sub-bituminous coal, worth less than $30 a metric ton, to a bituminous-type coal that saw prices reach $100 a ton earlier this year because of tight supplies and strong Chinese demand.
Indonesiaâ€™s low-quality coal, which makes up nearly 65 percent of total deposits in the worldâ€™s top thermal coal exporter, had been seen as uneconomical to extract and an unviable source of fuel because of its high moisture content and low heating value.
But Exergenâ€™s chief executive, Mike Smith, said in an interview on Wednesday that the company planned to set up a 50-ton per hour demonstration plant in Indonesia before building a $500 million commercial plant within five years.
â€śThe commercial plant will be located preferably as close to the coal resource here in Indonesia,â€ť Smith said. â€śIf we manage to find a project that works, there is no reason at all why five years from today the plant should not be in operation.â€ť
Exergen, whose shareholders include Indian power firm Tata Power and mining contractor Thiess, will also look for low-quality coal resources in Indonesia, Smith said on the sidelines of a coal conference in Jakarta.
The firm is developing a technology that can remove up to 80 percent of the moisture in brown coal, and has built a small pilot plant in Australia, he said.
Japanâ€™s Kobe Steel also has a brown coal plant in South Kalimantan together with Arutmin Indonesia, a unit of Bumi Resources.
That plant will turn high-moisture sub-bituminous coal with a heating value of below 4,000 kilocalories per kilogram into a product yielding about 6,000 kcal/kg.
â€śWe are interested in supplying our technology to mining companies here in Indonesia as many have very low quality,â€ť Kobe Steelâ€™s Yukio Akazawa said.
Exergenâ€™s Smith said that upgrading their technology would help Indonesian miners attract more buyers, especially those from India.
India is expected to overtake Japan as the top importer of Indonesian coal by the end of 2012 at the latest, Bob Kamandanu, the chairman of the Indonesian Coal Mining Association, said on Tuesday.