Bumi battles against weak coal prices

Mining group Bumi said it continues to target a medium term production target of 30mt each year and in light of the weak coal price environment, it will focus on lower cost pits and defer some of its expansion plans.

The London listed Indonesian group said it has been hit by weaker coal prices, particularly during the second half of the year. As a result, it said realised selling prices for the year are expected to be around $70.0/t compared to $81.4/t for 2011.

Meanwhile production for Berau Coal, which is 84.7% owned by Bumi, is expected to be in line with previous guidance at 21m tonnes of coal for the full year. 2013 production is forecast at 23mt, an increase of 9.5%.

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Production unit costs for the second half of 2012 are expected to be in line

with the first half, it added. Higher fuel and contractor costs have been mitigated and further cost saving initiatives are underway, Bumi explained.

PT Bumi Resources, in which Bumi has a 29% interest, reported a net loss of $655m for the nine months ended September 30th 2012. An independent investigation is currently being commissioned by the board into alleged financial irregularities in Bumi's Indonesian operations, especially in relation to PT Bumi Resources. Bumi said it will be consolidating its 29.2% share of this loss.

Commenting on the full year, Chief Executive Officer Nick von Schirnding said: "Our near term strategy is very clear: to effect a separation from Bumi Resources and to maximise value in our operating subsidiary, Berau."

"We have taken immediate steps to mitigate the on-going impact of lower coal prices by adjusting the mine plan for Berau, targeting lower stripping ratios and reducing hauling distances."

CJ