The Adaro Minerals pillar, AEI’s second pillar of growth, consists of two main business segments: metallurgical coal mining and the minerals and mineral processing. The mining operations are made up of five concession areas in Central and East Kalimantan and produce semisoft coking coal to hard coking coal with premium quality, which are important materials in steel production. Within the minerals and mineral processing business, through a subsidiary under this pillar, AEI has a project to develop an aluminum smelter in North Kalimantan.

The Adaro Minerals pillar is led by PT Adaro Minerals Indonesia Tbk (AMI) (IDX: ADMR), a public company listed in IDX since January 3, 2022. ADMR was 179x oversubscribed during the IPO’s pooling period and collected Rp660,708,150,000 in IPO proceeds. AMI’s IPO is one of AEI’s strategic initiatives to create value and the company’s business potentials have made it an important participant of Indonesian capital market since the first trading day. ADMR’s market capitalization at the end of 2023 was $3.6 billion, or down 18% from $4.4 billion at the end of 2022.

PT Adaro Minerals Indonesia Tbk (AMI)

AMI is in an important position within the Adaro Group’s transformation to be a bigger and greener Adaro and its commitment to support the Indonesian government’s measures to achieve net-zero emissions (NZE) in 2060 or earlier. For fulfilling this commitment, AEI has set the target to have around 50% of its total revenues generated from non-thermal coal businesses by 2030, being pursued by developing an aluminum smelter, exploring opportunities in various green mineral products, and expanding the markets for metallurgical coal – an essential material for steel production, in addition to adding renewable energy business into its business portfolio.

Metallurgical Coal Mining Business

Collectively, AMI’s five mining subsidiaries hold CCoWs (Coal Contract of Work) for a total concession area of 146,579 ha with total coal reserves of 173.0 Mt and total coal resources of 975.6 Mt as of December 2023.

AMI produced 5.11 Mt of coal in 2023, or increased 52% from the previous year. Its coal sales totaled 4.46 Mt, 39% higher than 3.2 Mt in 2022 and exceeded 2023 production target of 3.8-4.3 Mt. AMI’s production and sales volumes in 2023 were mostly attributable to its subsidiary PT Maruwai Coal (MC), with a small portion contributed by PT Lahai Coal (LC), which restarted operations in 2H23.

AMI recorded overburden removal of 18.70 Mbcm in 2023, or 125% higher than that of 2022, resulting in a strip ratio of 3.66x, or 48% higher than 2.47x in 2022 due to the reactivation of LC’s operations and the opening of more areas at MC’s Lampunut mine.

In 2023, AMI continued investing in various facilities and infrastructure to support its target to increase production to 6 Mtpa in 2025. Among the main activities achieved in 2023 were the tender process for the second barge-loading conveyor and Lampunut Waterfront camp, with constructions to commence in the near future.

Most of AMI’s coal production in 2023 was hard coking coal (HCC) from its Lampunut mine in Maruwai called the Enviromet. Enviromet has strong coking characteristics, rating 9 for its CSN (crucible swelling number) on a scale of 1-9, making it a superior product for blending in coke-making. The coal’s ultralow ash and low phosphorus content can help to reduce waste and carbon emission in the production of pig iron or steel, and its high vitrinite content complements lower vitrinite coal thus improving the blendability in coke-making, ultimately leading to higher quality steel. Due to these characteristics, the Lampunut coal has its own competitive advantage over coking coal from other countries.

AMI’s coal continues to gain recognition in its market, whereby in 2023 the largest sales destination was Japan (32%), followed by China (31%) and India (18%). AMI also continues to increase sales volume to the domestic market in response to the significant development of coke plants in Indonesia. 

AEI maintains strong confidence in the fundamentals of metallurgical coal, since the steel sector is predicted to enjoy positive demand outlook on the back of economic growth, increasing industrial activities, urbanization, and the advent of green economy. The promising market outlook has made AMI confidently set its sales guidance at 4.9-5.4 Mt in 2024.

Mineral Processing Business

For its minerals and mineral processing segment, AMI has started with a project to build an aluminum smelter under its subsidiary PT Kalimantan Aluminium Industry (KAI).

Aluminum Industry Overview

Indonesia’s aluminum market is projected to grow significantly due to the widespread use of aluminum across various sectors, such as automotive, construction, packaging, and aerospace. The lightweight and corrosion-resistant properties of aluminum make it a preferred choice in many industries. 

Current aluminum demand in Indonesia is estimated to be around 1 million tonnes per year, while current production capacity has not met the demand. AMI is seizing the opportunity to fill the supply and demand gap and support the Indonesian Government’s program of mineral downstream processing and to reduce import of aluminium products into Indonesia by developing an aluminum smelter as explained below.

AMI’s Aluminum Smelter Project (Under KAI)

Situated in North Kalimantan province, KAI’s smelter project consists of an aluminum smelter and its supporting facilities such as jetty and permanent employee dorm, that are currently in the construction stage and expected to commence in 2025. The full production capacity of the 1st phase is estimated to be 500,000 tonnes of aluminum ingots per annum, which may increase up to 1,500,000 tonnes of aluminum ingots per annum. The electricity supply for the 1st phase of the smelter project will be provided by PT Kaltara Power Indonesia, a subsidiary of PT Adaro Power.

In 2023, KAI has successfully achieved financial close for the first phase of smelter development. KAI has also completed land clearing, soil investigation, land levelling, and piling work for the baking furnace facilities in the aluminum smelter area.

AMI’s Financial Performance in 2023

AMI recorded revenue of US$1.09 billion in 2023, or 20% higher than in 2022, supported by 39% increase in sales volume that was offset by 14% decrease in average selling price. Out of this, AMI’s operational EBITDA increased 17% y-o-y to US$573.50 million, resulting in operational EBITDA margin of 53%. Core earnings in the same year totaled US$421.02 million or 23% higher than in 2022. 

In 2023, AMI’s operational expenses decreased significantly by 88% to US$8.84 million on the back of regulatory changes related to government charges.

Awards Received by AMI’s Subsidiaries in 2023 AMI’s subsidiaries strive to maintain excellence in all areas of operations. Throughout 2023, these companies gained numerous awards to recognize their achievements in various areas. Some of these awards are:

• Blue PROPER rating from the Ministry of Environment and Forestry
• “Utama” rating from the Ministry of Energy and Mineral Resources in Good Mining Practices (GMP) Award on Mineral and Coal Mining Environmental Management aspect
• Two Gold trophies at the National Productivity and Quality Convention (TKMPN) XXVII
• Certificate of merit of Silver category at Indonesia Sustainable Development Goals Award 2023, for the contribution to SDGs 15.3 – Land Conservation
• Certificate of merit of Gold category at Indonesia Sustainable Development Goals Award 2023, for the contribution to SDGs number 8.3.(a) – Increasing Business and Job Opportunities for Communities

More detailed information on PT Adaro Minerals Indonesia Tbk, including its comprehensive annual reports, is accessible at the company’s website www.adarominerals.id.