Tambang Timah to establish subsidiaries

JAKARTA (JP): State-owned mining company PT Tambang Timah, listed on the Jakarta and London Stock Exchanges, will soon set up three subsidiaries to accelerate its expansion and growth.

"Initially, we will establish PT Perusahaan Investasi, an investment company that will coordinate our subsidiaries," Tambang Timah's president, Erry Riyana Hardjapamekas, said after an extraordinary meeting of the company's shareholders yesterday.

Erry said that Perusahaan Investasi will be 99.9 percent owned by Tambang Timah and 0.1 percent by Koperasi Mitra Mandiri, Tambang Timah's employee cooperative.

The other two subsidiaries to be established are PT Kawasan Industri Bangka (Bangka Industrial Estate) and PT Timah Engineering Company.

He said that Bangka Industrial Estate will cooperate with the Sociedad para la Promocion Reconversion Industrial of Spain to develop an industrial estate on Bangka Island in South Sumatra.

Most of the company's tin mines are on Bangka, where it is headquartered.

Tambang Timah and the Spanish firm have also agreed to examine the possibility of jointly setting up a power plant to support the industrial estate.

Timah Engineering, which will be jointly established with several domestic and foreign companies, will become a service company to enhance the utilization of Tambang Timah's workshops, dockyards and infrastructures, which have not been operated efficiently.

Erry stressed that the establishment of the subsidiaries is aimed at minimizing his company's costs and maximizing the utilization of its assets in earning more income.

"The assets which have not yet been fully utilized in our tin mining operations will be jointly operated with other parties to maximize their utilization. We'll make the assets as our profit centers instead of cost centers, as they are now," he said.

According to Erry, Tambang Timah's main strategy in the short and medium terms is to continue its core business -- tin mining -- by increasing production to expand its share on the world market and to reduce production costs.

"In the long term, we will seek opportunities for diversification, which will be financed with our cash surplus and additional borrowing funds, if necessary," he noted.

He said that in the long term, Tambang Timah cannot rely on its single commodity, tin. "We need diversification to secure our long-term growth," he said, adding that the company's tin mining operations will last for 10 years.

"The diversification will be in the form of greenfield explorations, joint ventures with either local or foreign companies in the mining businesses and acquisition of existing mining companies," he said.

By the year 2000, Tambang Timah will also produce gold and coal, he said.

Erry said that yesterday's extraordinary meeting approved the company's plan to set up a joint venture with Phelps Dodge Indonesia Corp. of the United States for gold exploration in Aceh province. The two companies signed on April 16 a memorandum of understanding on the joint venture establishment.

He said that his company will have a 25 percent stake and Phelps a 75 percent stake in the planned joint venture, which will be capitalized at US$8.5 million.

Erry said that Tambang Timah will also cooperate with the state-owned general mining company PT Aneka Tambang to explore for gold and diamonds in the latter's concession areas in Kalimantan.

Tambang Timah, which reported an 11.8 percent increase in its net profit to Rp 134.5 billion ($58.14 million) last year due mainly to a significant rise in prices, will raise its tin production to 41,500 tons this year from last year's 37,416 tons. By 1999, production is likely to reach 50,000 tons.

During the first quarter of this year, the company's profits jumped by 91 percent to Rp 39.4 billion from Rp 20.6 billion in the same period of last year.

Erry predicted that tin prices will continue to fluctuate this year, but they may average at $6,300 per ton. (13)