Harum plans mine acquisition this year

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Publicly listed coal producer PT Harum Energy plans to acquire more mining sites in East Kalimantan in an attempt to secure more reserves to increase production.

Harum president director Roy Antonio Gunara said that his company expected to complete the acquisition of a coal mining site by the year’s end. “We are seeking many sites, of course. However, we have to be realistic and be more careful in the current market situation,” he said on Thursday.

Coal miners have been under pressure as slowing demand from China, the biggest coal consumer, has led to declining coal prices. China’s coal imports in August dropped 0.7 percent compared to the same month last year and 15.8 percent from July, Bloomberg reported quoting from Qinhuangdao Seaborne Coal Market’s website.

Roy declined to give further details about the acquisition plan. However, he hinted that the company would acquire a mine that had begun production so that it could directly contribute to Harum’s production.

“We will use our internal cash to finance the acquisition,” Roy said.

Harum and its subsidiaries currently have 509 million tons of coal resources and 106 million tons of reserves. The company has stakes in three mining business, PT Mahakam Sumber Jaya with a 80 percent stake, PT Santan Batubara (50 percent) and PT Tambang Batubara Harum (99.9 percent). Mahakam and Santan have entered production stages, while Tambang Batubara is expected to start production in the fourth quarter of the year.

According to Roy, Tambang Batubara will be able to produce 1 million tons when it is in full production next year.

Harum expects to produce 12.5 million tons by the year end, a slightly lower target than the previous estimation of 13 million tons.

Roy said that the lower projection was due to lower production from Santan Batubara, due to logistical and operational reasons. Despite lower production, Roy added, the company would meet all sales contracts it had signed.

“We always have higher sales because we also purchase coal from third parties,” Roy said.

Harum’s total production reached 6.1 million tons in the first half of the year, increasing by 39.5 percent compared to 4.4 million tons in the same period a year earlier. Meanwhile, sales volume reached 7.4 million tons, up 62 percent from 4.6 million in the same period last year.

Its average selling price (ASP) stood at US$90.20 per ton in the first half of the year, nearly unchanged from $90.10 per ton in the same period last year. The company’s quarterly ASP was worse, declining 7.6 percent to $86.70 per ton in the second quarter of the year from $93.80 per ton in the first quarter.

“We are expecting lower ASP in the third quarter of the year compared to the second quarter as a consequence of lower global coal prices,” Roy said.

Shares in Harum (HRUM) closed at Rp 6,350 (67 US cents) apiece on Thursday, declining by 2.3 percent from Rp 6,500 apiece a day earlier. HRUM stocks have dropped 7.3 percent year-to-date.