Illegal mining in concession hurts Bukit Asam unit
The Jakarta Post, Padang, West Sumatra
A unit of publicly listed coal mining firm PT Bukit Asam called for the government's help to crack down on illegal miners operating in its concession area, saying their activities were having an adverse impact on its business.
Eko Budhiwijayanto, deputy general manager of PT Bukit Asam Unit Penambangan Ombilin (UPO), said the firm had been suffering losses over the past three years due to a steady decrease in production caused by the illegal mining activities.
Unless the government takes immediate action against the illegal miners, the firm will have no option but to close down.
"The firm will, in effect, have to lay off all 950 workers it now employs," Eko said.
The firm has a concession in Sawahlunto, 150 kilometers east of Padang, the capital of West Sumatra province.
Mining operations in the area date back to the time of the Dutch administration, but it is still believed to contain coal reserves in excess of a 100 million tons.
During its peak production between 1995 and 1999, the firm mined up to 1.2 million tons of coal per year. But, due to the troubles caused by the illegal miners, the output has been declining since 2000. This year, the firm targeted its output at a mere 200,000 tons.
In the first semester of this year, the firm booked a loss of Rp 58 billion.
According to Eko, the illegal miners sell their output to Semen Padang, a subsidiary of Semen Gresik, whose coal needs reach 60,000 tons monthly. Semen Padang, which is the traditional customer of Bukit Asam, has cut its orders from the firm as illegal miners offer cheaper coal.
Due to the presence of the illegal miners, in December last year, UPO stopped open-pit mining operations and started to focus on underground mining, which it commenced in 1999.
Underground mines need much greater investments than open-pit mines. Several Japanese banks have voiced interest in financing the development of UPO's underground mines, but they are still reluctant to disburse funds due to the illegal miners.
"How could you feel safe extracting coal underground when up on the ground surface, other people do the same thing," Eko said.
Aside from Ombilin, Bukit Asam also has concessions in Tanjung Enim and Banjarsari in South Sumatra.
The government controls 83.74 percent of Bukit Asam, while the remaining shares are held by public investors.
Bukit Asam sold 9.57 million tons of coal last year, posting a net profit of Rp 177.95 billion (US$21 million).
During a hearing with the House of Representatives in May this year, Bukit Asam's president Ismeth Harmaini said the firm planned to dismiss 364 workers of its Ombilion site with severance pay of Rp 30 billion.