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coking coal development project called IndoMet Coal, which is a joint venture between BHP Billiton and Jakarta-listed PT Adaro Energy, is expected to start production soon, according to a report.

'€œThe first production will start in the third quarter of 2013,'€ said Isnaputra Iskandar, a research analyst with PT Nomura Indonesia, which recently hosted a roadshow for Adaro Energy in the United States and Canada.

IndoMet Coal is currently 75 percent owned by Australia'€™s BHP Billiton. The remaining 25 percent is owned by Adaro, whose shares are traded on the Indonesia Stock Exchange (IDX) under the code ADRO.

The IndoMet Coal project covers seven contracts of work in East and Central Kalimantan. Coal reserves under the agreement are estimated at 774 million tons.

BHP Billiton is a merger between Broken Hill Proprietary (BHP), which had been operating mines largely in Australia since the 19th century, and Billiton, which started business as a tin miner in the island of Belitung, Indonesia. The companies merged in 2011 and have operations in several countries around the world, mining coal, oil and gas, aluminum, manganese and iron ore, among other commodities.

Adaro, one of the largest thermal coal producers in Indonesia, is aiming to produce between 50 million and 53 million tons of coal this year. It produced 11.42 million tons during the first three months of the year, an increase of 4.2 percent compared to a year earlier. It achieved sales of 11.23 million tons in the January to March period, a decline of 0.2 percent year-on-year.

Adaro'€™s shares closed at Rp 1,210 (12 US cents) on Tuesday, up from Rp 1,200 on Monday.

Indonesia is one of the largest exporters of thermal coal. However, a number of coking coal miners have also established businesses in the country to meet the demand from iron and steel manufacturers for the commodity.

One of the producers is Jakarta-listed PT Borneo Lumbung Energi & Metal, which through its concession run by PT Asmin Koalindo Tuhup produced around 4 million tons last year and is expecting to boost production to 7 million tons this year.

Australia is currently the biggest supplier of coking coal, accounting for 51 percent of world exports, according to the World Coal Institute. The US, Canada and China are also important suppliers. Coking coal is usually more expensive than thermal coal.

The main markets for coking coal are China and India.

The World Coal Institute has estimated that demand for coking coal in iron and steel production will increase by around 0.9 percent per year from 2002 to 2030 period.

The government has set the country'€™s coal reference price (HBA) for May at US$85.33 per ton, down from $88.56 per ton in April. Coal miners in the country have been suffering from declining coal prices on the back of a weak global economy.