Tue, 02 Aug 2011

From: The Jakarta Globe
By:Muhamad Al Azhari

Arutmin Indonesia, a subsidiary of coal miner Bumi Resources, and Japanese steel manufacturer Kobe Steel are jointly constructing a smelter that will transform brown coal into higher-quality coal.

“Low-rank coal is in abundance in Indonesia. Supply should continue to far exceed domestic demand in the future,” said Dileep Srivastava, a director at Bumi Resources.

He said it would cost $150 million to build a smelter able to process a million tons of low-grade coal a year into higher-grade coal. Low-grade coal has a high moisture content

Dileep didn’t specify how much coal the planned smelter would be able to process. He only said that a facility with a capacity of one million to two million tons a year appeared economical.

The smelter, to be built at Tanah Bumbu in South Kalimantan, should be finished by next July. A second facility is planned for South Sumatra, according to Amin Lukman, assistant executive director of the Indonesian Coal Mining Association (APBI).

Both plants are being built in response to a new government rule banning exports of low-rank coal starting in 2014.

Dileep did not say how much of the coal from the Tanah Bumbu smelter would be exported.

The smelter would be Indonesia’s first brown coal upgrade facility. It would be able to increase the calorie of coal from 4,500 kilo-calories per kilogram to 6,100 kilo-calories per kilogram.

“The conversion economics to bulk scale are being separately studied,” Dileep said. “We are engaged in dialogue with strategic partners to come in on an investment platform in exchange for coal off-taking.”

He did not offer any details on the companies that were involved in the talks.

Bumi, the parent company of Arutmin, has the right to set up two commercial-scale plants licensed by Kobe Steel, which is providing technology, Dileep said. The second commercial-scale plant is the one in South Sumatra referred to by Amin, from the APBI. Dileep did not offer details on its exact location.

He said setting up two upgrading brown coal projects for the company’s low calorific value coal assets was “a strategic priority of Bumi Resources. It is also in the national interest.”

Another source of brown coal could come from Pendopo Energi Batubara, a coal exploration firm that is also owned by Bumi, he said.

Dilpeep acknowledged that the profit margins for such operations might not be as high as selling high calorific value coal directly. Yet, he said the business remained attractive.

“I think a scale of one to two tons per annum is likely to be economic,” he said.