Wednesday, June 15, 2011

Indonesia's Indika to acquire smaller mines to boost coal production

Indonesian-listed coal miner PT Indika Energy plans to boost the capacity of the mines it controls through PT Kideco Jaya Angung to 50 Mt in the next two to three years from 40 Mt, President Director Arsjad Rasjid told the Wall Street Journal. With annual revenue of around $440 million last year, Indika is Indonesia's third-largest coal miner, behind PT Adaro Energy and PT Bumi Resources.

Indika will expand its acquisition efforts but will focus on lower profile targets. "The attention of the world is on Indonesia, so it is going to be more of a challenge" to find good deals, Mr Rasjid said.. "People look at all the big ones and we will look at all the small and medium companies. We look at the spoiled children and the naughty children."

He said that with more than $400 million on its balance sheet, the company has the war chest for acquisitions.  Last month it announced plans to sell up to a 30% stake in PT Petrosea, its coal-mine construction and logistics arm.

PT Nomura Indonesia last week predicted that coal prices will climb 40% next year as global supply fails to keep up with rising demand in Asia. "We expect demand from China and India to remain structurally strong, and Australia and South Africa to continue to face capacity constraints," said Isnaputra Iskandar, a Nomura analyst. "In addition, Indonesia's strong domestic coal demand may put more pressure on global coal supply."

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