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.