Timah to sign coal export contract with LG

Rendi A. Witular, Jakarta

State-owned PT Timah, the world's largest integrated tin miner, seeks to sign a contract with South Korean giant LG Corp. this week to export 50,000 tons of coal, as part of the former's expansion program in diversifying its businesses.

Timah president Thobrani Alwi said recently that the contract with LG would be worth at least US$16 million, or $320 per ton, for the next two years, with the first shipment expected in July.

"The coal contract with LG, probably to be signed this week, is part of our long-term plan to diversify our product range," said Thobrani after a hearing with legislators last week.

Thobrani said that Timah had projected its coal output to reach around 400,000 tons at the end of this year, with the company currently in negotiation to acquire several smaller coal producers in East Kalimantan in order to increase coal production.

"We have allocated around $20 million to acquire several coal producers in a bid to boost our output," he said.

Through its investment subsidiary, PT Timah Investasi Mineral, Timah is currently negotiating with a number of mining companies at home and abroad for possible acquisition.

Aside from coal, Timah has also obtained mining authorization from the Indonesian government to explore for gold and diamond in Kalimantan, alluvial gold in North Sumatra, and gold and base metals in West Aceh.

Indonesian coal producers have now benefited from a decision by China, the world's largest producer and consumer of coal, which has decided to limit its coal exports this year due to a serious coal shortage at home.

Due to the shrinking coal supply from China, several countries such as Japan, South Korea, Taiwan and India have been seriously hurt, not only in terms of supply but also in the increasing price of coal due to the limited supply.

According to the Indonesian Coal Mining Association (APBI), citing the Business Monitor International, coal production from Indonesia in 2004 is estimated at around 119.7 million tons, up from 109.3 tons in 2003 and 103 million tons in 2002.

Seventy percent of Indonesia's coal production goes toward export.