Timah wins approval to buy Salim coal mining firms

Timah wins approval to buy Salim coal mining firms

JAKARTA (JP): Publicly listed tin mining company PT Tambang
Timah won unanimous approval from shareholders on Wednesday to go
ahead with plans to purchase three coal mining companies formerly
owned by the Salim Group.

Timah president Erry Riyana Hardjapamekas said his company
would use its own funds to finance the acquisition of the three
coal mining companies, which currently operate under holding
company PT Indocoal.

"We are prepared to use internal funding, but if it is not
enough we may seek external funding as well," Erry said
following the shareholders meeting.

He said if Timah's own funds proved insufficient, the company
could issue bonds or right shares, or turn to strategic investors
to help finance the takeover.

Shareholders, he said, approved the use of either of these
three options for the acquisition.

Indocoal is one of over 100 companies the Salim Business Group
surrendered to the Indonesian Bank Restructuring Agency (IBRA) to
repay its debts to local banks.

Grouped under the holding company Indocoal are PT
Indotambangraya Megah and PT Ganda Upayatama, which themselves
control four subsidiaries.

Together the companies operate 120,000 hectares of coal
concessions in Kalimantan and in South Sumatra. The total coal
reserves in its South Sumatra operations reach 564 million metric
tons.

IBRA plans to put Salim's coal mining firms up for sale in the
first quarter of this year, with final bids expected to by the
end of this month.

The competition for the firms is fierce, with about 15 foreign
and five local investors interested in acquiring Indocoal's stake
in the companies, according to IBRA.

The agency declined to name the investors, but state-owned
coal mining firm PT Bukit Asam and investment firm PT Bhakti
Investama have reportedly shown an interest in the companies.

"Buying a stake in Indocoal is part of our diversification
efforts," Erry explained.

He said earlier Timah's tin reserves were dwindling and that
the company wanted to expand into other sectors.

In the third quarter of last year, Timah's refined tin
production dropped 14.4 percent to 25,522 metric tons from 28,799
tons during the same period in 1999.

The company will pursue one of three options either to boost
tin production or to diversify its interests, according to Erry.

It will either intensify its exploration activities, expand
its business or acquire stakes in other firms, he said.

In 1999 the company backed off its bid to purchase a stake in
coal mining firm PT Kaltim Prima Coal, because Timah regarded the
asking price as too high.

Timah, one of the world's largest tin producers, is
headquartered on Bangka island in South Sumatra.

In the third quarter of last year, the company booked Rp 296
billion in net profit (about US$31.5 million), up 5.45 percent
from the Rp 280.7 billion recorded in the same period the
previous year.

But the increase in net profit was mainly the result of an
increase in nonoperating income, including foreign exchange
gains, and revenue from the sale of fixed assets.

Erry also said the local administration of Bangka and Belitung
had asked for a 25 percent stake in Timah.

"For Timah the request is no problem," he said. But he added
that Bangka and Belitung must forward the request to the
government, as Timah's majority shareholder.

Timah is 65 percent owned by the government and 35 percent by
the public.

During the shareholders meeting, an agreement also was reached
on the establishment of an independent board of commissioners in
compliance with a recent ruling by the Jakarta Stock Exchange
(JSX).

The JSX issued a ruling requiring a company's board of
directors to consist of individuals not connected with the
company's shareholders.

The ruling is aimed at improving good corporate governance in
publicly listed companies. (bkm)