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tate-owned coal miner Bukit Asam expects to raise its coal production amid a surge in coal prices in the world market.

Bukit Asam president director Arviyan Arifin said Tuesday that the company’s coal production would increase to 27 million tons next year from about 25 million tons this year.

The higher production target, however, needs support from state-owned railway operator Kereta Api Indonesia (KAI), which transports Bukit Asam’s coal from its mining area in Tanjung Enim, South Sumatra, to its Tarahan coal terminal in Lampung.

Besides increasing its coal production, Bukit Asam plans to acquire a mining company in the first quarter of next year.

“We also have plans for inorganic growth by acquiring a mining company that supports our business,” Arviyan said on the sidelines of a memorandum of understanding (MoU) ceremony with state-lender Bank Mandiri on a loan agreement.

KAI president director Edi Sukmoro said KAI was building a double-track railway to increase its capacity to transport coal from Bukit Asam’s mining area.

Following the construction of the railway between 2017 and 2018, KAI will be able to increase coal transportation by 15 percent.

The average coal price reference set by the Energy and Mineral Resources Ministry for November rose to $84.89 per ton, a 23 percent increase from $69.09 per ton in October.

Meanwhile, the 90-day price of Newcastle 6,300 kilocalories (kcal) per kilogram gross as received (GAR) has more than doubled since the start of this year, S&P Global Platts data showed.

However, the price had dropped 11 percent since early November to $101 per metric ton free on board (FOB) on Tuesday, data showed.

To finance Bukit Asam’s expansion plan next year, Bank Mandiri will provides dollar loans worth US$230 million and rupiah loans of Rp 1.7 trillion ($125.3 million).

About $100 million of the dollar loans, set to mature after five years, will be used to finance the company’s capital expenditure, including for its acquisition plan and preparations for the development of a coal-fired staem power plant (PLTU).

The other $130 million, which is a rollover loan to become due after one year, will be used as a guarantee for foreign exchange treasury management for the company.

Meanwhile, the rupiah loans will be used for payments for Bukit Asam suppliers and as invoice financing.

Bank Mandiri deputy president director Sulaiman Arif Arianto said the lending was part of the bank’s support to enhance synergy among state-owned enterprises.

At present, Bukit Asam has coal deposits of 8.27 billion tons, 3.3 billion tons of which are mineable.

With more acquired mines, the company expects to produce at least 58 million tons of coal annually by 2020 and 98 million tons per year by 2024.

Aside from acquiring mining companies, Bukit Asam is also building a mine-mouth power plant to take advantage of the company’s larger coal deposit.

So far, the company plans to begin the construction of a 2x620 megawatt (MW) mine-mouth power plant project in South Sumatra, known as Sumsel 8, later this year.

The power plant is being built by a joint venture between Bukit Asam and China Huadian Hong Kong Company Ltd.

Three other power plants are also planned for Sumatra, namely the 3x600 MW Sumsel 9 and 10, as well as the 800 to 1,200 MW power plant in Peranap, Riau, in a $2.4 billion partnership with state-owned electricity company PLN and Tenaga Malaysia Berhad (TNB). (wnd)