While Indonesian coal has become more attractive to international buyers due to its comparatively low price, recent regulatory changes that limit foreign mine ownership to 49% have led to some uncertainty in the industry. We had the chance to speak to Ben Lawson, Chief Development Officer, PT Apple Coal about the Indonesian coal market, anticipated impacts of recent regulatory changes on the industry and the importance of rising to the infrastructure challenge.
IMM Events: Australia’s Altura Mining has recently announced to raise Indonesian coal output to 2 mil mt in 2014. In the company statement Managing Director James Brown said that he “believes that the long-term outlook [for coal] is much more positive than current market attitude.” Would you agree with his assessment?
Ben Lawson: I would definitely agree. The market has undergone a correction that was long over-due. Market fundamentals are now realigning themselves via “natural selection” with the producers who have invested with a long-term view looking quite strong. Those who did not reinvest in their mines and infrastructure during the years of high profit are collapsing.
IMM Events: What factors will have the biggest impact on the region’s long-term competitiveness in the global market?
Ben Lawson: Being Indonesia based and focused, I would say that Indonesia will always have a competitive advantage through, firstly shorter project gestation periods; for example licensing, environmental and logistical aspects, and secondly freight rates and vessel options to the existing and emerging coal markets.
IMM Events: The Indonesian government has recently passed new laws which limit foreign ownership of new mines to 49%. What are the main implications for operating mines within this new framework?
Ben Lawson: This divestiture regulation is not only for “new” mines, but all mines. As an investor that has been in Indonesia for 16 years I can say that I am not so troubled by this. “When in Rome do as the Romans do.” I do, however, think that the government will have to rethink this and many other regulations in the face of changing market conditions. For example, many investors are already thinking that the Indonesian government’s “nationalistic” control over mining is just another reason not to invest here.
IMM Events: In your opinion, what are the most promising projects in the region and what factors make them stand out?
Ben Lawson: Infrastructure, hands down! The mining aspect of coal/minerals is the easy part. It’s not rocket science. But investing in Indonesia’s dilapidated, or non-existent infrastructure offers a huge up-side to profit no matter what happens to the broader market.
IMM Events: You will be chairing the Kalimantan Coal conference, to be held on the 3rd and 4th September on Balikpapan, Indonesia. What discussions would you like to have with your industry peers at the event?
Ben Lawson: Yes, I will be chairing both days of the conference. Last year was well attended and the subject matter was spot-on. Obviously the constantly changing mining law via the implementing regulations are of the greatest concern to all investors. I also think that another major point of discussion is how miners are able or attempting to cut costs instead of cutting output to cope with the lower prices.