Tambang Timah to establish subsidiaries

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)