For Advertorial July 26

For Advertorial July 26 Company: Kaltim Prima Coal Writer : Rikza Abdullah

KPC strengthens basis for coal mining operation

PT Kaltim Prima Coal (KPC) is strengthening the basis for operation of its huge coal mine in Sangatta, East Kalimantan, by improving efficiency and productivity, as well as by intensifying its community development programs aimed at promoting the self- reliance of the local people in the long run.

"We are increasing the efficiency of our operations by shortening the time it takes to get the coal out of the ground, processing and then getting it to the ships toward our export markets," says Noke Kiroyan, president director of KPC.

The company, the only coal mine in Indonesia that currently is totally dedicated to the international market, generates close to US$ 500 million in export revenue. KPC contributed almost a quarter of Indonesia's total coal exports of around 65 million metric tons in 2001 and forecasts that it will be capable of maintaining its position as Indonesia's largest coal exporter as well as its position in the international market in 2002.

KPC, jointly owned by Anglo-Australian mining company Rio Tinto and British energy firm BP, operates a 7,900 square kilometer coal mine in Sangatta under a working contract signed with the government in 1978. It started construction in 1989 and commissioned the mine in 1991, while commercial production started in 1992. Its mine produces bituminous steam coal with high calorific value, very low ash content, low sulphur and low total moisture -- brand-named as Prima Coal and Pinang Coal.

Coal is transported from the mine site to KPC's world-class coastal port facilities at Tanjung Bara by a 13.2-kilometer-long, 2,100-ton-per-hour-capacity overland conveyor. And from the port facilities, which can handle vessels of up to 220,000 dead weight tons, the company exports all of its coal to 20 countries in Asia, Europe and America.

"To increase efficiency and productivity we are also improving the skills of our personnel through continuous training," Kiroyan says.

KPC employs about 2,700 permanent employees, of whom only 23, or less than 1 percent, are expatriates. Another 3,500 people work at the mine for supporting contractors.

Kiroyan says the company, under its efficiency programs, is also improving the maintenance of equipment to reduce the possibility of operational breakdown, and its heavy equipment maintenance crew can hold its own against that of any other international company. It is also fostering health, safety and environmental management.

The government of East Kalimantan bestowed KPC with the highest award (Golden Certificate) for environmental management two years in a row, in 2000 and 2001, as the only mining company in the province to receive this honor.

According to a survey on occupational health risks, the company has succeeded in substantially reducing the incidence of occupational illnesses. Work safety is at the top of the list of management responsibilities. Production must be stopped immediately at whatever cost at the slightest hint of danger to human life.

"We are also taking measures to increase our coal production without having to procure additional equipment, so that the company's productivity, calculated on the basis of the number of its employees, will improve," Kiroyan adds.

KPC, from its mine with marketable coal reserves of about 650 million metric tons, steadily increased its coal production from 7.3 million metric tons in 1992 to 15.5 million metric tons in 2001 and is aiming at producing 17 million metric tons this year.

Kiroyan explains that KPC will increase the budget for its community development programs in East Kalimantan to Rp 15 billion (about US$1.75 million) this year, from Rp 10.45 billion last year, in a bid to further strengthen the company's relationship with the local community.

KPC, he says, has also established a community trust, called Yayasan KPC Kaltim Bangun Bangsa, which will provide further support for development opportunities in the local community surrounding the company's operations. Initially, the community trust will be funded by contributions from Rio Tinto and BP of 3 percent of the dividends that they will receive from KPC operations during 2001 and 2002 -- estimated at about $2 million each year.

"Our responsibility towards community development is a social contract with the local communities that has permitted our corporation to enter the area and commence operations," he says. "Our operations may have fulfilled all legal requirements, but without the acceptance by the community, we lack legitimacy."

Thus far, KPC has spent $13 million on its community development programs, which include assistance for small businesses, health care services, infrastructure development, provision of educational allowances and scholarships, and agricultural training.

"As long as we are still in operation, we will help improve the capacities and skills of local community members, so that at the end of our operation in 20 years' time, the local community will have become self-reliant in its economy," Kiroyan says.

He says to assist small businesses, for example, KPC is encouraging local residents to establish business units, and organizing training on technology and management. It is also providing local farmers with initial investment and training them on farming techniques.

"We will offer land-clearing jobs to the local businesses and help them obtain credits from a commercial bank for the procurement of heavy equipment," he says. "We hope the local businesses can use their land-clearing contracts with us as collateral for the credits."

Last year, KPC provided training classes for local entrepreneurs and farmers in business management, farming techniques and cooperatives management at a total cost of Rp 375 million. The company also granted low-interest loans totaling Rp 84 million to farmers and business entrepreneurs, in addition to the loans worth Rp 90 million it obtained from Bank Rakyat Indonesia.

On health care services, KPC provides immunization and prevents the spread of common diseases, such as tuberculosis, malaria and dengue fever.

Last year, in cooperation with the East Kalimantan office of the Ministry of Health, KPC contributed X-Ray and intensive care unit medical equipment worth Rp 250 million to the Teluk Lingga mini-hospital, sponsored medical visits to remote villages and funded a vaccination campaign there.

On educational and infrastructure development, the company will continue to offer incentives to teachers moving to Sangatta and scholarships to students, while helping to finance the expansion of school buildings, roads and places of worship. It spent Rp 3.83 billion last year on educational and infrastructure development.