Indonesia-focused mining firm Asia Resource Minerals (ARM) is trying to negotiate an increase in production at its Berau coal mining subsidiary in response to plans for an output cap of 22.35mn t this year.
The proposed cap is below ARM's production target of 25.75mnt for this year, which is in line with the company's most recent life of mine plan. "The clear indication from the Indonesian authorities is that they continue to favour a cap on production, but we are optimistic that we will be granted a cap that falls within a range between the most recently indicated cap and our most recent life of mine plan," said ARM.
Jakarta had proposed a nationwide cap on coal production at 400mn t this year to try and support prices that have fallen to their lowest level in years because of oversupply. But the plans stalled following opposition from mining firms, with the government now focusing instead on tackling the widespread problem of illegal mining that likely accounted for more than 56mn t of Indonesia's total coal production last year. Indonesia is on target to produce more than 420mn t of coal this year, having lifted production by 15mn t or 7.6pc from a year ago to 213mn t during January-June.
Under new regulations announced last week, which aim to tackle illegal mining and exports, Indonesian coal exporters will have to hold a special licence issued by the trade ministry from 1 September. Government-appointed surveyors will also verify the origin of coal cargoes before being loaded on to vessels under the new regulations, while exporters will also have to prove that they have paid the relevant royalties and taxes before cargoes can be shipped.
Berau is Indonesia's fifth-largest coal producer. It produced 6.1mn t of coal during January-March, up by 15.1pc from 5.3mn t a year earlier. It produced 24.6mn t in 2013 but had said it was aiming to lift its production by 4.3pc this year.
London-listed ARM is focusing on cost cutting and boosting profits after making a loss of $212mn last year, aiming to consolidate and return to profit following a protracted split from Indonesian conglomerate Bakrie. It had debts of $507mn as of the end of last year, with the company last week launching a $450mn bond offering to help pay off the remainder of its debt. The notes are due in 2019 and will be guaranteed by Berau.
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