Tata Power’s $1.2 billion investment in the coal assets of Bumi Resources has hit pay dirt, with the Indonesian mining company announcing a huge coal discovery.
Indonesian firm discovers an additional 442 million tonnes of coal reserves
MUMBAI: Tata Power’s $1.2 billion investment in the coal assets of Bumi Resources has hit pay dirt, with the Indonesian mining company announcing a huge coal discovery.
Dileep Srivastava, senior vice-president, investor relations, at Bumi Resources told DNA Money from Jakarta that an additional 442 million tonne of reserves have been found in the Pedayak region.
“Bumi is extremely bullish and has pegged a higher coal price assumption of $75.56 tonne against the previous $53.92 per tonne,” he said, hinting at the high quality of the fuel.
“The price assumption is conservative, the market price is almost twice the assumption,” Srivastava said.
Bumi will make another reserves upgradation announcement in August.
Tata Power had acquired a 30% stake in the KPC and Arutmin mines owned by Bumi Resources through a special purpose vehicle in July 2007. The two mine blocks currently have proven reserves of 1.1 billion tonne.
“They (the Tatas) took a decision at the right time (to buy a stake in Bumi). It was an astute move by the Tata group to have secured coal assets when the supplies were tightening.”
Meanwhile, in an unrelated development coinciding with the Bumi discovery, Tata Steel said certain findings encouraged it to press ahead with the joint venture with Riversdale Mining Company to kick-start a coal mining project in Mozambique.
“The Riversdale hard coking coal is said to be ideal for the steel industry. The quality of the hard coking coal, combined with a 1.9 billion tonne inferred JORC (an industry standard for evaluating ore reserves) resource and low strip ratios will make the Benga Coal project a world class project and give Riversdale the opportunity to be a globally competitive coal producer,” Tata Steel informed BSE on Monday.
Srivastava recalled how some analysts had panned the Tata group for buying the 30% stake at a far higher rate. Bumi boasts the world’s best thermal coal, which Tata Power is expected to use once the Mundra ultra mega project comes on stream.
“In addition, there is strong evidence of ‘significant’ additional increases in marketing reserve potential from three other mining sites in KPC,” he said.
On Monday, Bumi became the most valuable company traded on the Jakarta Stock Exchange, with a market capitalisation of $18 billion.
Apart from Coal, Bumi has mining stakes in copper and nickel, and is venturing into coal bed methane projects.
Some months ago, Bumi had announced increasing coal production and sales by 12%, accruing average prices that were at least 40% more compared with 2007.
Bumi had declared marketable coal reserves of 1.402 billion tonnes as of October 1, 2007. This is now expected to increase by 31.5% by 442 million tonnes to a minimum of 1.844 billion tonnes by August this year, when Bumi plans to declare its new augmented marketable coal reserves as of June 30, 2008.
Motilal Oswal alluded in a research report on Tuesday that “There is strong evidence of ‘significant’ additional increases in marketing reserve potential from three other mining sites in KPC.”
j_satish@dnaindia.net
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