Saturday 7 March 2009

Straits Asia set to add another coal mine

Mining company Straits Asia Resources is close to acquiring a third coal mine in Indonesia, chief executive Richard Ong said yesterday at a press conference.

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Guanyu said...

Straits Asia set to add another coal mine

By Robin Chan
7 March 2009

Mining company Straits Asia Resources is close to acquiring a third coal mine in Indonesia, chief executive Richard Ong said yesterday at a press conference.

He said that the deal, expected to be completed this year, will more than double the firm’s coal output by 2012. It is set to add at least two million tonnes a year in production capacity.

He declined to say how much the acquisition will cost as negotiations are still under way.

He disclosed that eight to 10 suitors have shown interest in buying the 47 per cent stake in the company held by its parent, Straits Resources.

Straits Asia, whose profits quadrupled last year, plans to produce 20 million tonnes of coal a year by 2012, up from the 9.5 million tonnes targeted for this year, he said.

The company currently owns two mines, on Sebuku in south-east Kalimantan and in Jembayan in east Kalimantan.

Combined, the two mines are expected to contribute about 18 million tonnes a year in 2012. The remaining two million tonnes will come from the new mine, which will be located near Jembayan.

The company is still waiting for the authorities to approve the expansion of the Sebuku mine into anew 5,121ha area. MrOng said there is no reason for the approval not to go through, but if it did not, Sebuku’s production capacity would remain at 2.2 million tonnes a year.

Straits Asia has several long-term customers committed to paying US$108 (S$168) a tonne for 7.3 million tonnes of coal this year, out of the 9.5 million tonnes targeted, Mr. Ong said.

‘That is a committed price, so at most, we will be 20 per cent affected,’ he added, explaining why, even if coal prices fall, the effect on the company would be limited.

Straits Asia’s share price has fallen by 80 per cent since reaching a high of $4.15 in June last year. The fall is part of a wider slump in commodities, but Mr. Ong said he was not concerned.

‘I am not focused on the stock price; I am focused on the balance sheet. We want to make sure our balance sheet is strong,’ he said. The firm reported a cash flow of US$170 million last year.

The counter closed 1.3 per cent up yesterday at 78.5 cents.