C

oal miner Toba Bara Sejahtra is aiming to maintain, if not lower, its annual output at around 8 million tons this year to help reduce production costs and cope with the fall in coal prices in the world market.

The miner expects the global seaborne coal market to remain under pressure from continued excess supply, while demand from China, the main buyer, is expected to remain low.

The global coal market has suffered in the past year as demand from China '€” which buys almost half the world'€™s coal and ore cargoes '€” declined by 22 million tons.

International coal price benchmark Newcastle dropped 17 percent in 2014, averaging US$70.95 per ton on the back of persistent oversupply.

'€œGiven the above factors, in 2015, the company is expected to focus its resources and efforts on maintaining business sustainability and resilience,'€ the company said in a statement. For the past few years, the company had been continuously improving cost efficiencies by running executable mine plans that met the combined objective of achieving profitable targets and sustaining long-term reserves, the statement went on.

In line with this objective, the company expects to produce a coal output of between 6 and 8 million tons in 2015.

The target means the company will attempt to either lower or maintain its annual output from the 8.1 million tons it produced last year.

The company saw its production rise by 24.6 percent year-on-year (yoy), the increase helping the company boost its revenue despite its average selling price (ASP) falling by 4.4 percent last year.

Toba Bara, founded by Presidential Office chief Luhut Binsar Panjaitan, enjoyed an 18.52 percent increase in total revenues from the $421.85 million it made in 2013 to $499.96 million last year, the company'€™s latest financial result revealed. The growth is far higher than the 6.34 percent revenue increase it registered in 2013, which the company attributes to a fixed-pricing strategy it applied throughout last year.

The rising production, however, led to greater production costs, which in turn hurt the firm'€™s profitability. Toba Bara booked $18.33 million in its bottom line last year, slightly down from the $18.54 million it made in the previous year.

The coal miner saw a 21 percent rise in cost of goods sold from $342.3 million in 2013 to $ 413.8 million last year, stemming from the company'€™s significant increase in production volume.

'€œHigher production volume typically increases mining costs such as OB [overburden] removal, overhaul distances, coal extraction and fuel, which account for the largest components of production costs,'€ the statement continued.

Toba Bara Sejahtra'€™s total coal resources are currently estimated at 236 million tons, from three mining concessions located in East Kalimantan. The company has the capacity to produce up to 16 million tons of coal per annum.

The miner markets its coal mostly to East Asian markets, with China the company'€™s main buyer, absorbing 34 percent of its total sales volume last year.

South Korea, India and Taiwan followed with 18 percent, 16 percent and 15 percent contributions to Toba Bara'€™s sales volume, respectively

A 71.8 percent stake in Toba Bara is owned by Toba Sejahtra, a Jakarta-based firm founded by retired Army general and senior Golkar Party politician Luhut.