Is it plausible for a coal mining company to become (environmentally, socially, financially) sustainable for the next decades? For ADRO, it is more than plausible.
Despite making a hefty $405 million of profit (mainly from 54Mt thermal coal mining) and having strong cash position of $1.1 billion during year 2020 pandemic; it is putting more focus on non-thermal coal resource, i.e. coking (metallurgical) coal, which is a key material for steel production.
Coking Coal Portfolio
- Kestrel Coal – QLD (Australia)
-
- Bought from Rio Tinto in 2018.
- 48% ownership.
- Resource of over 400 Mt.
- Current production 5-7 Mt per annum.
- Adaro MetCoal Companies (AMC) – Central & East Kalimantan (Indonesia)
-
- Bought from BHP in 2016.
- Full 100% ownership.
- Resource of over 800 Mt.
- Current production 1-2 Mt per annum.
At current coking coal price of $100 – $120 per tonne, imagine how much cash these assets can bring to the company.
While Kestrel Coal is already a mature and self-sustained operation, it is not the case with AMC.
To bring up the AMC production capacity from current rate, it needs to invest heavily to transport the coal from 7 CCoW (Coal Contracts of Work) in Central Kalimantan either by barging along Mahakam river or road haulage to the port. Building rail network could prove much costlier although more efficient for >10 Mt capacity.
Renewable Energy
Apart from investing in coking coal, the company is also looking at investing more in renewable energy through its subsidiary Adaro Power (AP) that currently own over 2GW (including the ones that will be commissioned soon) of power plants in the country.
Indonesia is targeting for 23% renewable energy mix, i.e. more than 11GW additional renewable capacity in the next few years; and it is very open for IPP (Independent Power Producers) to contribute to that target.
The country itself has huge potential for renewable power generation according to MEMR (Ministry of Energy and Mineral Resources):
