Mining firm PT Adaro Minerals Indonesia Tbk (ADMR) has allocated US$ 70-90 million Capital expenditure (Capex) for 2023 for one of its coal metallurgy (hard cooking coal).
The company was established in 2007 under the name PT Jasapower Indonesia. Adaro Minerals has a subsidiary PT Alam Tri Daya Indonesia, which has 5 affiliated companies. The company obtaines 5 mining concessions in East Kalimantan and Central Kalimantan.
Significant growth in coal production
Adaro Minerals Head of Corporate Communication Febriati Nadira explained that the 2023 Capex did not include the investment for the aluminum smelter project.
“The company expects to reach the financial close of this project in the first half of 2023 and will make further announcements regarding the equity portion at a later date,” she said on February 15, 2023, as quoted by investor.id. “We will make further announcements regarding the equity portion later.”
Based on the company’s operational report for Q4 2022, Adaro Minerals recorded coal production of 3.37 million tons. This realization increased by 47% compared to 2021’s of 2.3 million tons.
Febriati said the production volume exceeded the company’s 2022 target of around 2.8-3.3 million tons. Consequently, coal sales volume in 2022 grew by 39% to 3.2 million tons compared to 2021 of 2.3 million tons.
The increase of production was the result of subsidiary PT Maruwai Coal concession, which began operational in 2019. In terms of overburden removal volume, the amount increased by 62% to 8.32 Mbcm in 2022 from the previous year of 5.15 Mbcm.
“This is in accordance with the company’s medium-term sales target of 6 million tons per year,” Febriati said.
In 2022, the company’s majority of coal export of 85% went to Japan, China and India. While in 2023, the company plans to reach new markets and increase the volume of sales to domestic markets.
Risks in coal mining industry
Adaro Minerals may face difficulties due to the decreasing demand for coal as many countries, including Indonesia, have started to shift toward renewable energy resources. The lower demand will eventually lower the company’s revenue.
The government’s coal export ban policy in early 2022 has affected the coal price. Until the end of 2022, the coal prices kept increasing, said Roza Permana Putra, CEO of PT Golden Eagle Energy Tbk (SMMT), during a public expose on December 16, 2022.
The year-long Russia-Ukraine war has kept coal prices high due to the demand volatility. The demand also rose because of the freezing temperature during winter and limited energy cuts from Russia.
The long-term mining activities have damaged the environment as well as causing social and economy impacts to the society.
By nature, coal threatens soil fertility and has become a threat to biodiversity, water and air quality and has caused environmental pollution. After post-operation, the explored mining area leaves traces of mine pits and acid mine drainage, which can affect the quality and quantity of water.
The social impact of mining has created conflicts between mining companies and local communities. The local people have directly experienced the negative impact from the mining activities on their health and surrounding environment.
