DBS Berau Coal Energy: Not Rated; Rp430; BRAU IJ

Secured US$1bn sales commitment

BRAU has secured sales commitment for 17 million tons of coal. With the average selling price of US$60 per ton, BRAU would be pocketing a total of US$1.02bn. This year, BRAU volume production target is 17 million tons equivalent to 29.77% y-o-y increase. Although the company has secured standby buyer for its products, the unfriendly weather throughout the year has imposed higher degree of difficulties in the mining process. Yet, BRAU management is optimistic that the production target will be met.
By 2014, BRAU targets to produce 30 million tons per year, which could only be done through new mines acquisitions, which the company has been on a lookout. In 2012, BRAU will start new mining operation in Gurimbang with volume production of one million per year. In 2013, another new mining area in Block Kelay will also start its operation. BRAU has allocated US$240m capex for up to 2014, of which US$48m is for this year and US$89.6m for 2011. This capex will be mainly used for the construction of their stockpile.