Bumi may acquire metal mines to diversify earnings

Bumi may acquire metal mines to diversify earnings
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First Published: Wed, Apr 04 2007. 12 06 AM IST
Updated: Wed, Apr 04 2007. 12 06 AM IST
Singapore: PT Bumi Resources, Asia’s third-largest coal miner, said it is looking to acquire metal mines to expand sales of gold and copper and to diversify its earnings.
Bumi, which in March sold a 30% stake in two of its coal mining units to Tata Power Co., India’s second-biggest utility by sales, wants to increase investments in iron ore and metals mining, Nalinkant Rathod, a commissioner at the Jakarta-based company, said in an interview on 3 April in Singapore.
The coal exporter plans to start exploring for metals to tap rising demand from China, the world’s fastest-growing major economy.
Metal prices have risen as decades of underinvestment in mines and a Chinese economy that has doubled in size in the last 10 years means global miners such as BHP Plc can’t deliver enough supplies to meet the burgeoning demand. “Definitely, we will have to divert to other commodities like the copper and gold properties that we already have,” said Rathod.
Gold prices have gained 3% this year after rising 19.3% in 2006. Copper prices in London are up 13.2% so far after gaining 44% in 2006.
Bumi sold the 30% stake in its coal mines to Tata Power for $1.3 billion (Rs5,590 crore). The proceeds will be used to pay an estimated $988 million of debts in Bumi and its units by end of May, the company said on 31 March.
Rathod said $730 million was debt owed by Bumi’s PT Kaltim Prima Coal and PT Arutmin Indonesia, while $258 million was debt owed to a syndicated group led by Credit Suisse. “Bumi will be a debt-free company and, definitely, from the shareholders point of view, a debt-free company is not a right company,” said Rathod. “We have to look for acquisition opportunities which are appropriate within the mining sources industry,” he added.
Bumi, Indonesia’s biggest exporter of power station coal, reported last month that 2006 net income rose 80% to $222.3 million. The company plans to boost coal production by 50% by 2010 to take advantage of rising prices of the fuel. “We will remain, primarily, a coal company for the next four to five years and diversification will come only after 2010,” Rathod said.
Sales of thermal coal, used to generate electricity, have risen after China cut exports to meet domestic demand. Bumi sold 50 million tonnes last year, a 13% increase from the year before.
Bumi, controlled by the family of Indonesia’s chief social welfare minister has a chequered record of trying to push through deals to sell coal assets. Last year it failed to sell stakes in the two mines to local investment bank Renaissance Capital for $3.2 billion.
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First Published: Wed, Apr 04 2007. 12 06 AM IST
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