72 Adaro Energy Annual Report 2009
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Coaltrade Services International Pte. Ltd.
Units 2005
2006 2007
2008 2009
change FY08 vs. FY09
PT Adaro Indonesia Mt
6.19 5.62
7.48 7.00
3.00 -57
Third party Mt
0.25 4.48
1.85 0.96
0.34 -65
Total Mt
6.44 10.10
9.33 7.96
3.34 -58
Coaltrade’s main activity is to purchase coal from a variety of producers from South and East Kalimantan and blend them to meet customer’s speciic requirement by using IBT’s own port facilities. However, due to
the economic slow down in 2009, most of Coaltrade’s marketing efforts were spent on assisting the market- ing of Adaro’s Envirocoal. In total, Coaltrade sold 3.3 million tonnes of coal in 2009, of which 0.34 million
tonnes was third party coal. This was a 58 reduction compared to the previous year and 86 below the plan. To support the Group’s long-term strategy of annual organic growth, Coaltrade is now putting more
resources into third party coal trading to bring more revenue contribution to the Group.
Cost Reduction Initiatives
Adaro Energy is undertaking various initiatives to better control and reduce costs, including: • Control of a part of each critical section of the coal supply chain
• Control of one of the barging and ship loading contractors will helps to manage shipment scheduling better and minimize demurrage costs
• Centralized fuel procurement and selective fuel price hedging to help control and minimize fuel costs
• Mine-mouth power plant to replace 20MW of diesel-ired electricity consumed by the mine, reducing the electricity expense and Adaro’s dependence on oil
• Overland conveyor, powered by mine mouth power plant, to reduce hauling costs by an estimated US1-2t
• Installation of GPS and ground radar on trucking leet to avoid bottlenecks • Use of bigger and faster self-propelled barges
• Dredging the new channel at the mouth of Barito river, which has increased capacity and reduced the cost
• Greater use of the Taboneo anchorage for Adaro’s shiploading activities, which decreases barging distances and reduces shiploading costs
Fuel Procurement
Adaro recently began to procure fuel for its mining contractors and will continue to do so. On a selective basis, Adaro enters into fuel hedging contracts for its fuel requirements. These hedging contracts are
periodically entered into for the required supplies for the next three to six months. Adaro is able to secure an eficient fuel rate by purchasing the fuel in bulk and has also been working with its contractors to economize
on the usage of fuel in the mining operations.
The Supply Chain Department meet to discuss scheduling of vessels and barges to satisfy
customers’ tonnage and timing requirements. SIS’ Directors discuss mining
contracting prospects for 2010 at their ofice in South Jakarta.
Review of Operations
Adaro Energy Annual Report 2009 73
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Interview With Chia Ah Hoo, Director of Operations
Adaro produced 40.6 Mt in 2009 and has reserves of 889 Mt. Knowing that the CCA will expire in 2022, although
it can be extended by mutual agreement for another 20 years, can we expect more rapid production growth
going forward?
We will maintain a steady production growth up to our ultimate target of 80 million tonnes per year within a time frame that will allow us to
maintain our track record of being a reliable and consistent supplier of a quality product.
SIS’s performance in 2009 has exceeded expectations. What is your plan for SIS?
We want the company to be responsible for 50 of our mining output within three years and become a benchmark for productivity
and safety and a role model for environmental awareness among our contractors.
What is your greatest achievement?
Developing a Kalimantan team that has been able to consistently meet the challenges of continued production growth.
What was your greatest challenge?
Being able to increase production by more than 25 from 2005 to 2006 to meet cashlow requirements that arose from the 2005 LBO
when the company moved from being debt-free to highly leveraged.
What do you hope to achieve in 2010?
To meet our 45 million tonne target for the year while continuing to strengthen our supply chain and safety, health and environment
management. To also continue identifying and developing future leaders.
74 Adaro Energy Annual Report 2009
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Historical Photo Album
We have a long proud history as a mining company. And several of the original staff members are still with us today. In fact two of them have become members of the Board of
Directors. It shows the longevity and loyalty of our staff and that we reward their hard work. We feel our people are what sets us apart.
We are also proud of how we have built our mine and infrastructure to become the largest single site coal mine in southern hemisphere with a vertically integrated coal supply chain.
It has been a long journey and we intend to continue to stay on track to build a bigger and better Adaro Energy.
What follows are some photos of our past compared to the most recent photo of the same person or area.
Alastair Grant Director of Marketing
Chia Ah Hoo Director of Operations
1990 1991
2009 2009
Before...
...After
Adaro Energy Annual Report 2009 75
www.adaro.com
Historical Photo Album
Hauling road
2009
Overburden stripping
2009
Hauling road Kelanis bargeloader
1991 1991
Before...
...After
2009 2009
1991 1991
Before...
...After
76 Adaro Energy Annual Report 2009
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Before...
...After
Before...
...After
Historical Photo Album
Kelanis inland bulk terminal Kelanis ofice
1991 1991
2009
Tabalong bridge
1991 2009
Crane loading
1991 2009
2009
Adaro Energy Annual Report 2009 77
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Interview With Alastair Grant, Director of Marketing
What are your views of the thermal coal market going forward?
We believe the market will continue to be strong in Asia with particular growth in India, China and Indonesia. Growth will be limited in the
European and USA markets for probably most of this year.
How do you see the future market for environmental sub-bituminous coal?
The low pollutant type of coals will continue to be in strong demand. Coals with less environmental quality will have to be price competitive to
maintain their market share.
What is your perception of coal pricing for this year?
The coal market is now note: as at March 2010 in the unusual stage of having two distinct tiers of pricing, a lower Atlantic market
price and a much higher Paciic market price. We estimate that this gap will narrow as coals that traditionally go to the Atlantic market will
move to Paciic customers, particularly while freight rates are low.
What is your greatest achievement?
Developing a quality group of customers in long-term partnerships.
What is your greatest challenge that you have overcome?
Developing Adaro as a recognized and reliable supplier of Envirocoal.
What do you hope to achieve in 2010?
Continuing customer focus and further development of long-term markets.
78 Adaro Energy Annual Report 2009
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Adaro seeks to maximize workplace safety in all its operations through the implementation of a comprehensive safety, health and environmental management plan that meets international standards for
industrial health and safety and environmental rehabilitation. This management plan has been developed in accordance with ISO standards and was developed internally with assistance from both international and
domestic consultants.
Before the award was discontinued, Adaro received Pratama Award for mining safety from the Ministry of Energy and Mineral Resources from 2002 to 2004 thanks to its good performance in maintaining the safety
and health of its workers.
Although no serious or fatal injuries accidents occurred in 2009, the 23 LTI Loss Time Injuries on the site was higher than last year. Adaro’s LTIFR Loss Time Injury Frequency Rate, which measured the number
of lost time claims per million hours worked, of 0.65 was also slightly higher compared to the year before. The minimum target is to always keep the LTIFR below 1.
Health, Safety and the Environment
Adaro Energy Annual Report 2009 79
www.adaro.com
In the 9th century, Banjarmasin was
an Arab trading post located right
on the ocean shore, next to
the Barito River. Now, while still
alongside the Barito River,
Banjarmasin is located 13 km
inland.
Fun Fact
Loss Time Injury Frequency Rate
2009 YoY
Actual Plan
2008 2009
LTI 23
9 14
23 LTIFR
0.65 0.5
0.49 0.65
Environmental Management Rehabilitation
2008 2009
Project to Date
Rehabilitation ha 403
293 1,740
Land Disturbed - Mine ha 224
459 1,876
Land Disturbed - Other ha 206
687 3,373
Net Land Disturbed ha 27
853 3,509
Trees Planted 85,556
85,750 968,608
Adaro’s mining operations comply with environmental laws in all material aspects. Adaro attempts to keep disturbed areas to a minimum and land affected by mining is reclaimed progressively with replanting
being undertaken as soon as the land development is ready. Water run-off from disturbed areas is closely monitored and treated in settlement ponds before it is used to develop irrigated areas for more intensive
farming. Out-of-pit waste dumps are planned, with the waste being deposited in mounds up to six meters
high. The inal dump forms are contoured, top-soiled and planted with various fast-growing local grasses and trees.
Adaro monitors air quality continuously in its concession area and at intervals along the haulage road to Kelanis to ensure that methods being used to control dust levels comply with international standards and
to minimize impact on local communities. Air quality is controlled by ixed water sprays placed at intervals around the coal stockpiles. Water run-off from stock piles is channeled through an extensive drainage
system to settling ponds for settlement of all solids, including coal dust. Water released from these settling ponds is closely monitored. Adaro’s surfacing of the haul road has signiicantly reduced amounts of dust
produced.
Waste management principally involves the disposal of used oils, grease and other hydrocarbon products from equipment maintenance and overhaul workshops. Each of Adaro’s workshops contains drainage
systems for holding waste oils before disposal. Waste oils are disposed of through government-licensed disposal companies. Solid wastes within the concession area are collected and organic and recyclable waste
is separated. Solid waste is then delivered to a local government managed disposal area in Tanjung.
Adaro must prepare and submit to the Indonesian government a quarterly report on environmental performance. The Ministry of Energy and Mineral Resources, in conjunction with the Ministry of Environment,
oversees Adaro’s compliance with environmental laws and regulation in Indonesia. Adaro has, in general, complied with environmental standards and no signiicant environmental incidents have been noted.
Adaro received the PROPER Green award from the Ministry of the Environment for environmental rehabilitation and social programs excellence, the irst time this has ever been awarded to a coal company.
This is the second consecutive year that Adaro received this award. PROPER is an internationally recognized environmental social rating program that is designed to complement environmental law to
enhance the eficiency and effectiveness of environmental rehabilitation.
Fadjar Widijanta, External Relations Manager Fadjar Widijanta joined Adaro in 2003 as External and Media Relations Oficer,
became External Relations Section Head and then promoted to External Relations Manager in 2008. Prior to this this he was the Scientiic Assistant to the Executive
Director of the Indonesian Coal Mining Association and from 1995 to 2001 held geological posts with Ivanhoe Mines Ltd and the South East Java Project. He has
a degree in Geological Engineering from UPN Veteran, Yogyakarta.
Health, Safety and the Environment
80 Adaro Energy Annual Report 2009
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Management Report
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Governing Adaro
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Responsibility Adaro in Summary
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Revenues
In 2009, Adaro Energy’s revenues grew 49 to Rp26.9 trillion. The coal mining and trading division increased 51 to Rp25.3 trillion and contributed 94 to the Group’s revenue, net of inter-company transactions, up
