United Tractors to Invest $50m in Gold Mine to Reduce Dependence on Coal

United Tractors has set aside $50 million to invest in a processing plant and new infrastructure on a gold mine in Sumbawa, West Nusa Tenggara. (JG Photo/Yudha Baskoro)

By : Sarah Yuniarni | on 1:16 PM November 10, 2017
Category : Business, Commodities

Jakarta. United Tractors, a heavy machinery company controlled by one of Indonesia's largest business groups Astra International, has set aside $50 million for investment in a processing plant and new infrastructure on a gold mine in Sumbawa, West Nusa Tenggara, an executive from the company said on Thursday (09/11).

The company is seeking to diversify business and reduce its dependence on coal in the long run.

"We want to gradually diversify our units so we don't depend solely on coal, since we all know it's a volatile industry. The gold industry meanwhile is quite stable," United Tractors Chief Financial Officer Iwan Hadiantoro said on Thursday (09/11).

United Tractors acquired a 75.5 percent stake in Sumbawa Jutaraya, a gold mining company with 10 hectares of concession area, for $2.57 million in 2015.

Sumbawa has concession rights for a total of eight gold mine blocks. But the company has not been able to find gold reserves in seven of the blocks.

The gold processing plant, which is now under construction, is slated to start operation in 2019.

United Tractors is using internal cash to fund the construction of the plant and to build roads, ports and housing for its staff.

The company has Rp 20.3 trillion ($1.5 billion) in cash by the end of September, up 17 percent from Rp 17.3 trillion a year ago.

United Tractors is controlling the project through its subsidiary Pamapersada Nusantara.

The processing plant has a capacity of around 100,000 ounces of gold.

Iwan said the company has found reserves of around 350,000 ounces of gold  in one of the blocks — enough for the next seven years.

"We expect to produce around 50,000 ounces from one block annually," Iwan said.

Coal's Dominance

United Tractors makes most of its money from selling heavy equipment. It is also venturing into coal mining, contract mining and machinery construction.

The coal industry still contributes 90 percent of the company's overall business.

The company wants to cut that number to around 70 percent in the next three years.

It wants to do it by increasing revenue from its gold mine, coking coal — a type of coal that has a higher calorific value, production and power plants.

United Tractors is currently involved in the construction of the B5 and B6 units at Tanjung Jati coal-fired power plant that began in March this year.

The $4.2 billion and 2,000-megawatt power plant is a joint-venture project with Japan's Sumitomo and Kansai Electric Power located in Central Java. It is set to start operations in 2021.

The plant has received funding from Japan Bank for International Cooperation (JBIC) and a syndication of seven commercial banks: Mizuho Bank, Sumitomo Mitsui Banking, The Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Trust Bank, Mitsubishi UFJ Trust and Banking, The Norinchukin Bank and Singapore's Oversea-Chinese Banking Corporation (OCBC).

 

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