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)