The country’s third largest coal producer, publicly listed PT Indo Tambangraya Megah (ITM), is targeting to raise production by 16 percent this year as the company starts mining in a new area.

The company, which is a subsidiary of Thailand’s largest coal producer Banpu Plc, will expand production to 20.5 million tons this year from 17.6 million tons in 2008.

Sales are forecast to rise to between US$1.33 billion and $1.54 billion from $1.32 billion in 2008.

ITM president director Somyot Ruchirawat said on Friday the additional coal would be secured from a new mining site located in the eastern part of the existing Indominco block in Kalimantan.

“Indominco East Block will start producing by the second half of this year,” he said, adding the company expected the new mine would provide additional coal supply of up to two million tons.

The remaining planned output will be secured from other mining sites, thanks in part to the company’s current and ongoing output improvement initiatives, he said.

The initiatives are expected to help reverse a drop in production last year due to heavy rainfall. Last year, coal production was down 1.1 percent to 17.6 million tons from 17.8 million tons in 2007.

ITM finance director Edward Manurung said the company would spend $57 million on the improvement initiatives, which would take up the biggest part of the company’s capital expenditure of US$126 million allocated for this year.

The company will also spend $41 million on the Bontang port expansion in East Kalimantan, $6 million on the Bontang power plant, $15 million on the development of the Indominco East Block and $7 million on the new Bharinto mining project in East Kalimantan, which is targeted to start producing in 2010.

Edward said the company would use internal cash to finance its capital expenditure plans.

The company was looking for the opportunity to acquire more local coal companies located in Kalimantan, Ruchirawat said, without going into further details.

“With the decline in coal prices, it makes the price of assets cheaper and that’s an opportunity for us,” he said.

The company has estimated that coal prices next year will be between $65 and $75 a ton, relatively flat compared to last year’s $74 a ton.

So far, the company had secured 88 percent of targeted coal contracts with selling prices ranging between $75 and $85 a ton.

ITM shares declined 2 percent to Rp 14,750 Friday after UBS AG cut the stock’s rating to “neutral” from “buy,” citing its “expensive” valuation, according to Bloomberg.

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