Update COVID-19 in Indonesia: 130,718 confirmed infections, 5,903 deaths (12 August 2020)
12 August 2020 (closed)
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Australia-based BHP Billiton, the multinational firm engaged in copper, iron, gold, and coal mining, is reportedly considering to stop operations at its Indonesian coal mining sites - or even to sell these assets - due to the unattractive outlook for the global coal price. Through a 75 percent stake in IndoMet Coal, BHP Billiton holds seven (long-standing) Coal Contracts of Work (PKP2B) in Central Kalimantan. The company is now conducting a strategic review of all its business operations (including the Indonesian assets) to determine which direction to take.
BHP Billiton, the globe's largest exporter of metallurgical coal, opened its Tambang Haju coal mine in Central Kalimantan in 2015 and initially planned to start production (about one million tons of coal per year) from 2017 onward. The Tambang Haju mine is estimated to contain around 1.27 billion tons of coal. IndoMet Coal also controls concessions in the following coal projects on the island of Kalimantan: Lahai Coal, Ratah Coal, Juloi Coal, Pari Coal, Sumber Barito Coal, Kalteng Coal, and Maruwai Coal (since September 2015 IndoMet Coal has been selling its coal output).
Indonesian coal giant Adaro Energy controls the remaining 25 percent in IndoMet Coal. This company bought the stake from BHP Billiton in 2010 for USD $335 million. Soon afterwards coal prices started to collapse, leading to the bankruptcy of many smaller mining companies. However, also the bigger players have come under serious pressure. For instance, the world's largest privately-owned coal producer, US-based Peabody Energy Corp, filed for bankruptcy protection in mid-April 2016 after its debt burden became too high amid recent expansion efforts, a cancelled asset sale, and slumping coal prices.
Although in media it is speculated that BHP Billiton's strategic review is also conducted due to the high degree of business uncertainty in Indonesia's mining industry, Imelda Adhisaputra (President Director of BHP Billiton Indonesia) categorically denies the accuracy of these stories. After the Indonesian government introduced the 2009 New Mining law, the government has been eager to renegotiate long-standing Coal Contract of Work (PKP2B) with miners active in Indonesia in order to make these contracts in line with the content of the 2009 New Mining Law (which includes several 'protectionist' regulations that are negative for foreign investors such as a mandatory divestment rule).
Priatna Sahala, Executive Director at the Indonesian Coal Mining Association (APBI), urges the government to change those rules that negatively affect foreign investment in Indonesia's mining industry in order to create a better investment climate.