PT Tambang Timah stresses its interest in KPC shares

PT Tambang Timah stresses its interest in KPC shares

JAKARTA (JP): PT Tambang Timah is still interested in buying a
30 percent stake in the country's largest coal mining company, PT
Kaltim Prima Coal (KPC), the tin mining company's top executive
has said.

Timah's president Erry Riyana Hardjapamekas said the company
was currently waiting for a decision from the government about
the bid.

Timah offered to buy 23 percent of KPC's shares in 1998, but
the tin mining company, which is currently 65 percent government-
owned, later backed out of the deal following a disagreement on
the share price.

Erry said the Ministry of Mines and Energy was currently
negotiating with KPC's owners about the share price before
offering them to prospective buyers.

"We hope the government can give us a way out so we can
continue negotiating with KPC. Right now, we are waiting for the
government's decision on the bid," he said.

He said earlier negotiations with KPC's owners stalled,
because KPC considered Timah's bidding price was too low.

KPC valued its 23 percent stake at US$176 million.

Erry said the ministry had appointed a consultancy firm to
work with appraisers hired by KPC to reach an agreement on a fair
price for the coal company's shares.

KPC, equally owned by British companies British Petroleum and
Rio Tinto, operates a coal mine in Sangatta, East Kalimantan. The
company commenced commercial production in 1992.

KPC, the country's largest coal mining company with an annual
output of 15 million tons, is required to divest up to 51 percent
of its shares to the Indonesian government, individual Indonesian
investors, or companies controlled by Indonesians between the
fifth and 10th year of commercial production.

Last year, the ministry allowed the company to delay the
mandatory divestment program by one year, after it failed to sell
shares to PT Timah.

Under its contract of work, KPC must divest 30 percent of its
shares by the end of this year.

"Negotiations (for KPC's shares) have to be started from the
very beginning, because the shares offered are now 30 percent,"
Erry said.

Earlier this month, the government said KPC would be forced to
offer shares on the Jakarta Stock Exchange next year, if it
failed to find buyers for a direct private placement scheme.

The planned acquisitions are part of Timah's strategy to
diversify its business into "mineral mining sectors other than
tin". These sectors included gold, coal and diamonds, he said.

Erry said Tambang Timah had dropped a plan to buy a stake in
PT Berau Coal, because of Berau's large outstanding foreign debt.

"We decided to put off the plan to acquire Berau Coal for now
because the company, although it is technically sound, has huge
foreign debts. But we may consider the acquisition again after or
if the company restructured its debts."

Tambang Timah had been bidding for a 69 percent stake in Berau
Coal as part of a plan to diversify its business.

Erry said the company was also conducting "greenfield
explorations" for minerals other than tin, and had also
established cooperation agreements with foreign companies to
further its exploration activities.

Profit

Erry said Tambang Timah's net profit would be little changed
in 1999, from Rp 518.83 billion (US$74.1 million) recorded last
year.

He noted that tin prices had been steady over the first half
of the year, while the rupiah's recent rise against the dollar
would reduce the company's earnings from tin metal exports.

But the company would seek to offset the lower revenue
resulting from the stronger rupiah by increasing operational
efficiency, he said.

Erry said Timah would lower its tin output to approximately
40,000 metric tons, compared to over 43,000 tons in 1998, in
order to cut the country's tin supply in an effort to lift
prices.

He said that as a export-oriented firm, with over 75 percent
of its output exported, the company enjoyed a windfall profit
from the rupiah's sharp depreciation against the U.S dollar last
year.

Timah reported a net profit of Rp 518.8 billion in 1998, a 200
percent increase from Rp 177.8 billion in 1997. Its net profit
reached Rp 156 billion in the first quarter of this year,
compared to Rp 126 billion in the corresponding period in 1997.
(gis)