Coordinating Minister of Economics Hatta Rajasa recently stated publicly that those miners who will get expired shall give their concession to the state, and if they want to re-negotiate them, they shall re-negotiate the terms. Well, that's great for the state and people, but what's the meaning for the companies? Further lobby must be made from now, especially for those who will be expired in the next 10-20 years.
Why? Well, let’s take an example at the junior coal players who want to start their mining operation. It needs at least 4 or 5 years to start commercial production, including due diligence, feasibility study, JORC compliant, etc. Not stop at there, the company also has to tender mining contractors to commence production.
What about those who had commence their operation? Just look on Newmont who will expand their project to Elang-Dodo in upcoming years. The same condition also happened on Freeport, Bumi, Adaro, and those who bag major contract. Let’s start our topic. First stop: Bharinto Ekatama.
Bharinto is fully-owned by the 4th largest Indonesian miner, PT Indo Tambangraya Megah. The company's concession lies on the border of Central and East Kalimantan, mostly in North Barito Regency.
The company had started its mining activity since November 1997 and will end next week at 29 June 2011. In 2010, ITMG had revised its proven reserves from only 9 metric tons to 41.3 Mt. Meaning, it is the third largest asset of ITMG after Indominco and Trubaindo. However, on the production commencement, Bharinto had not yet made any single production according to ITMG's first quarter financial report. Why?
What about those who had commence their operation? Just look on Newmont who will expand their project to Elang-Dodo in upcoming years. The same condition also happened on Freeport, Bumi, Adaro, and those who bag major contract. Let’s start our topic. First stop: Bharinto Ekatama.
Bharinto is fully-owned by the 4th largest Indonesian miner, PT Indo Tambangraya Megah. The company's concession lies on the border of Central and East Kalimantan, mostly in North Barito Regency.
The company had started its mining activity since November 1997 and will end next week at 29 June 2011. In 2010, ITMG had revised its proven reserves from only 9 metric tons to 41.3 Mt. Meaning, it is the third largest asset of ITMG after Indominco and Trubaindo. However, on the production commencement, Bharinto had not yet made any single production according to ITMG's first quarter financial report. Why?
Well, according to some reports, the mining operation was obstructed mostly because of ‘permission’ from both provinces. Political issues in the way? It can be a problem. As the mine lies on two provinces and most of them take place on Central Kalimantan, the company needs a fair royalty portion to both governors. Plus, as both governors came from different parties (Golkar and PDIP), the company needs a lot of time to lobby both of them.
The case reminds me of Umbulan Project problem in East Java. The water spring project will run on five regencies and all of them wanted a piece of ‘cake’ from the project. Since 1980s until now, the project has not done yet due to this problem. Does this problem also occur in Bharinto?
Step aside the political issues. How is the development of Bharinto?
Its 2009 financial report says Bharinto had entered the construction stage effective since June 2006 to June 2009. The construction phase had been extended in June 2009 to June 2010. Meaning, the construction must had done since that time as no further extension report made in 2010. What about now?
According to ITMG’s website, The concession will produce sub-bituminous coal of 6,800kcal/kg with 0.8% sulphur. Presently is still in pre-operational development. The coal is planned to be transported by truck to Bunyut Port operated by PT Trubaindo Coal Mining, which later delivered by using tug boats to Bontang Coal Terminal or other destinations. In the other words, something obstructed their construction.
In 2010, the company had planned to start Bharinto’s commercial production in the fourth quarter. In March 2011, ITMG again revised its plan and stated its mine will operate in the second half of 2011. Well as the mine will go mature next week, will the plan go?
Next question, how important is Bharinto to ITMG?
First, let’s take a look on its acreage. Bharinto covers 22,000ha in the North Barito area, slightly smaller than Trubaindo (23,650ha), and Indominco (25,121ha). The neighboring major concessions are Adaro and BHP’s. Meaning, the mine has lots of potential.
Second, its proven reserves stood at 41.3 million tons as of end March 2011. The number is 13.2% higher than March 2010. As commercial operation has not yet started, much more undiscovered reserves shall lies beneath the mine.
Third, if as if the mine can commence full production, the company can make itself closer to other major miners like Bumi, Adaro, and Bayan. As of 2010, ITMG produce 21-22 million tons, slightly higher than Bumi Resources’ PT Arutmin, but already double from Bayan Resources’s 2010 production. Further production must be made to increase its income.
Again, back to Bharinto’s maturing license next week, the question can be raised would be 1) Will ITMG extend the concession? 2) Who had waited at the intersection? 3) What will happen to Bharinto next? Keep watching!
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