34.0 PT. Bayan Resources Tbk - Prospectus

thermal coal supply has amongst the lowest cash mining costs in Asia Pacific. In addition, significant freight advantages exist due to the geographic proximity of Indonesia to China, India and other key Asian importers, especially when compared to Australia and South Africa. Furthermore, the reliance on Indonesian thermal coal exports continues to increase as accessible bituminous reserves are becoming exhausted globally. According to a 2006 study by the Ministry of Energy and Mineral Resources, Indonesia had economic coal reserves of over 6.75 billion tonnes. The average export mine FOB cash cost of production in Indonesia increased to approximately US33.37 per tonne by the end of 2007, but was still less than that of its main competitor Australia at US38.32 per tonne. Indonesia is expected to remain as the largest thermal coal exporting nation through 2010F with thermal exports expected to grow to approximately 215.3 million tonnes annually by 2010F 7.3 CAGR between 2007 and 2010F. The slowing in export growth from the start of the decade is expected to be offset by significant increases in domestic demand. The Indonesian Government has set a policy in place to increase coal’s share of the energy mix from approximately 11 in 2007 to 33 in 2025F. The increase is expected to be primarily driven by increased coal-fired power generation for electricity and expansion of coal usage in other industries, including cement and paper. Indonesia’s state electricity company, PT PLN Persero “PLN”, is expected to install 9GW of coal-fired generating capacity under its Electricity Crash Program with an estimated further 1GW of new generation capacity coming from IPPs. As of the first quarter of 2007, this would result in coal fired capacity increasing from 10.4GW in 2007 to 18.0GW by 2010F. Using current coal-fired coal consumption trends, this capacity increase would lift related domestic coal consumption from approximately 31 million tonnes in 2007 to approximately 54 million tonnes by 2010F. Indonesia—2007 Thermal Coal Export Destinations Others Philippines Malaysia Thailand Hong Kong EU-15 China India Taiwan South Korea Japan 17 15 14 13 8 7 6 5 4 3 8 Data Sources: AME estimates In 2007, Australia struggled to maintain the 2006 level of thermal coal exports, mainly due to competition from higher quality coal exports and limited rail and port capacity. In 2007, Australian thermal coal exports increased marginally from 2006 levels to approximately 112.9 million tonnes. Infrastructure constraints limited Australia’s 2007 thermal coal exports and are expected continue to constrain exports in 2008F, with exports estimated to increase to approximately 118.0 million tonnes. However, Australia’s total export thermal coal production capacity has the potential to increase by up to 65 million tonnes per year in the period 2007 to 2010F. This capacity is in excess of forecast demand growth of 24 million tonnes over the 2007 to 2010F period, and also in excess of infrastructure capacity prior to 2010. However, port capacity is projected to rise from 301 million tonnes per annum at the start of 2007 to 429 million tonnes by the end of 2010F, while corresponding rail capacity is also targeted to rise from approximately 272 million tonnes per annum to around 404 million tonnes by the end of 2010F. South Africa is the world’s fourth largest thermal coal exporter in 2007 behind Australia, Indonesia and Russia. South Africa is the major exporter to Europe, where it competes mainly with Russia, Poland and Colombia. South Africa’s export production has been constrained in recent years by capacity limitations at the Richards Bay Coal Terminal “RBCT” and the rail line connecting the major coalfields to that terminal. As a 103