Indonesia Investments updated the company profile of Bumi Resources, a leading Indonesian natural resources group focused primarily on coal mining. The company is Indonesia’s largest coal miner by production volume and the world’s largest thermal coal exporter. However, due to weak global demand and weak corporate management, the company is at risk of default in the near future due to maturity of its debts. Moody’s has downgraded Bumi’s corporate rating from Caa1 to Ca.
Last week, Bumi Resources (Bumi) announced that is had entered into an agreement to settle a USD $1.3 billion debt with the China Investment Corporation (CIC). The agreement involves a portion of CIC’s existing debt balance to be swapped by 42 percent of Bumi’s holdings in Bumi Resources Minerals, 19 percent of Bumi’s holdings each in Kaltim Prima Coal, Indocoal Resources and Indocoal Kaltim Resources, as well as up to USD $150 million in new shares of Bumi. The residual amount will convert into a three-year loan at a competitive market rate.
China’s proposed ban on the import of low-grade coal is likely to hit small Indonesian producers hard but most large miners will only suffer a minimal impact, according to analysts and industry executives.
Indonesia is the world’s biggest exporter of coal for power stations and as much as a third of its exports to China could be blocked if the plan is implemented as currently suggested.
The big Indonesian producers such as Jakarta-listed Bumi Resources and Adaro Energy have the ability to blend lower and higher grades of coal in order to meet the possible new Chinese requirements and have ready access to other potential markets such as India.
“It is still a plan and needs further study,” said Cameron Tough, head of investor relations at Adaro. “We have a diversified customer group, with 53 customers in 15 countries. Last year China accounted for just 6 per cent of our sales of 48.6m tonnes.”
But there are many smaller coal miners that have far less flexibility and are already under intense financial pressure because of falling prices and their relatively higher costs.
“The part of industry that will be most exposed is the hundreds of very small producers that have little capital to wash coal and improve its characteristics,” said Xavier Jean, an analyst at Standard & Poor’s, the debt rating agency, in Singapore. “If China becomes a closed market to them it is much more difficult to establish new sales channels.”
While Indonesia is fretting about a possible Chinese ban on coal imports, Beijing is worried about Indonesia’s plan to restrict the export of unprocessed natural resources from January next year.
China relies on Indonesia for much of its imported nickel ore and bauxite, which is used to make alumina and then aluminium, and Chinese companies have been searching out new sources of these minerals to protect themselves against the possible Indonesian export ban.
Indonesia’s Bumi Resources, Asia’s biggest thermal coal exporter, posted an increase of more than 300 percent in net losses for the fourth quarter on derivatives transactions and higher interest payments.
Net loss was $34.21 million, compared with an $8.3 million net loss in the same period a year earlier, according to Reuters calculations based on published full-year and nine month results.
Bumi, the leading Indonesian miner and the world’s biggest exporter of thermal coal, posted 2012 net losses of $666.21 million, compared with a restated net profit of $216.29 million in the previous year.
Its full year derivatives losses were $344.86 million versus a profit of $66.06 million in 2011, according to its financial report.
The Jakarta-based miner’s 2012 revenues were $3.8 billion, compared with a $4.0 billion a year earlier.
Bumi, with a market capitalization of $1.5 billion, is controlled by the Bakrie Group, which joined forces with the Rothschild banking dynasty to list Indonesian coal assets in London via Bumi Plc.
Aditya Birla group is considering a bid for a 10 to 15 percent stake in Indonesian coal miner Bumi Resources Tbk PT (BUMI.JK) to secure coal supplies for its expanding cement and aluminium operations, the Economic Times reported on Thursday.
The transaction, along with an offtake agreement, could be worth over 10 billion rupees, the paper said.
“I wouldn’t say we have made up our mind, but to have a share in one of the largest coal companies would be an attractive option,” the paper quoted an unnamed group official as saying.
The telecoms-to-cement conglomerate requires thermal coal for group companies Hindalco Industries, India’s top aluminium producer, and UltraTech Cement, the country’s largest cement producer.
The group has said to have shown interest in bidding for several overseas coal assets recently, including for Australian coal miner New Hope Corp.
India holds 10 percent of the world’s coal reserves, but supplies have fallen short of rising demand from power plants as well as steel and cement companies because of environmental and land acquisition delays, forcing expensive imports.
Indian power utility Tata Power holds 30 percent stake in two coal mines owned by Bumi Resources, which it had acquired for $1.3 billion.
A spokesman for Bumi Resources could not be immediately reached for comment. A sokeswoman for the Aditya Birla group said the group does not respond to speculation.