Delta Dunia eyes 15% rise in overburden removal business

Publicly-listed mining service provider PT Delta Dunia Makmur is targeting for its overburden removal business, conducted through subsidiary PT Bukit Makmur Mandiri Utama (Buma), to increase by 10 to 15 percent this year.

The target will see the company work on its overburden removal volume ranging from 367.4 million bank cubic meters (bcm) to 384.1 million bcm this year. The company’s overburden removal volume reached 334 million bcm in 2011.

“We will have to consider external factors such as the rainy season,” Delta Dunia director Rani Sofjan said during a public expose on Tuesday.

She said that her company held 15 existing contracts this year.

“Last week, we formalized a contract worth US$130 million with Kaltim Prima Coal (KPC) for its Elang mining site in Kalimantan. We’ve already had an agreement since April 2011,” Rani said, adding that the contract for KPC Elang site would last until 2014.

Delta’s subsidiary, Buma, recently signed an extension on its mining service contract worth $820 million from PT Perkasa Inakakerta, a subsidiary of publicly-listed coal producer PT Bayan Resources. The contracts, involving the overburden removal of 261 million bcm and transportation of 29 million metric tons of coal, will be effective for five years until 2017.

Buma also signed a similar contract extension agreed on Dec. 19, 2011, with PT Gunungbayan Pratamacoal, another subsidiary of Bayan Resources. The agreement involves a contract of overburden removal with a total volume of 260 million bcm, during the Jan. 1, 2012, to Dec. 31, 2017, period for $640 million.

Other contracts involve two deals of overburden removal and coal hauling with PT Adaro Energy, a contract with Kideco, four with PT Berau Coal, one with PT Darma Henwa, one with PT Marunda Graha Mineral, one with PT Lanna Harita Indonesia and two with PT Arutmin Indonesia.

“We have no target of obtaining more contracts. We’re only targeting to improve our services,” Rani said.

Delta Dunia’s coal production reached 34.8 million metric tons and its coal hauling business reached 11.5 million metric tons in 2011. Rani said that Delta Dunia expected a 5 to 10 percent increase in coal production this year.

“Given the growing overburden removal volume and coal production, we hope to maintain our earnings before interest, taxes, depreciation and amortization (EBITDA) at a similar level,” Rani said.

The overburden removal business has become the major contributor for Delta Duni, standing at about 80 percent of revenue. Coal production and hauling contributed to the remaining percentage.

Delta Dunia reported a consolidated revenue of Rp 4.98 trillion in the first nine months of 2011, increasing by about 18 percent from Rp 4.19 trillion in the same period in 2010. Due to the growing cost of revenue, the company’s operating income stood at Rp 482.84 billion in the first nine months of 2011, declining significantly from Rp 755.96 billion in the same period in 2010.

The company suffered a net loss of Rp 12.14 billion in the first nine months of 2011, after reporting a net profit of Rp 351.94 billion in the same period in 2010.

According to Rani, the company will allocate around $300 million as capital expenditure to purchase up to 200 pieces of heavy equipment, which will support its mining services businesses.

“Currently, our total vehicles reach above 3,000 units,” Rani said, adding that the expenditure would be supported by internal cash, facilities from heavy equipment vendors and funds from rights issues last year.

The company has yet to use Rp 1.2 trillion funds raised during a rights issue last July.

Delta Dunia president director Hagianto Kumala said that his company once planned to use the funds to acquire a mining site.

“However, we canceled the plan after examining the site, located in East Kalimantan,” he said.

Hagianto said that Delta Dunia would still look for an opportunity to invest in a coal mining company in an attempt to secure a mining contractor business. Hagianto revealed that the company preferred a greenfield mining site holding coal reserves of 25 million metric tons and above 9,000 in calories. (rcf)