Coal Producers to Capitalize Growing EV Market through Metal Mining

Summary

Several coal mining producers, including PT Adaro Energy Tbk (ADRO), are expanding into the smelter business. Adaro, through its subsidiary, PT Alam Tri Abadi, bought 145.60 million shares of or a 3.7 percent stake worth Rp 358.76 billion in PT Cita Mineral Investindo Tbk (CITA).

Mahardika Putranto, the corporate secretary of Adaro Energy, said that the company chose to invest in CITA because developing metallurgical grade bauxite and smelter grade alumina businesses are promising in the long term. Apart from ADRO, PT Harum Energy Tbk (HRUM) and several other coal producers are also expanding into metal and mineral mining businesses.

Our View

In the midst of the commodity boom, coal producers are notably keen on pivoting into metal and mineral mining. Such a strategy is in line with projections highlighting future increasing demands for metals and minerals triggered by renewables developments. In the metal and mineral segment, coal producers target copper and nickel as raw materials for electric batteries. The Indonesian Metallurgical Professionals Association (Prometindo) even estimated that demands for metals and minerals would go up following the increase in electric vehicles (EV) production. These demands would increase rapidly until 2050, a period when EVs have been mass-produced. Prometindo calculated that the iron demand would increase from 100 million to 350 million tons in 2050, while the demand for copper would increase from 15 million tons to 45 million tons.

Moreover, the Energy and Mineral Resources (EDM) Ministry also stated that Indonesia’s rare-earth elements potentials were quite promising. The ministry also allows foreign investors to explore rare earth elements on Indonesian soil. Director-General of Minerals and Coal (Dirjen Minerba) Ridwan Djamaluddin revealed that Indonesia’s rare-earth metals potentials were quite massive. Geological Agency’s survey data in 2009-2020 showed that there were 20,000 tons of rare-earth elements resources in Tapanuli, North Sumatra. In Bangka Belitung, 186,000-ton estimated monazite resources were discovered with tin deposits. In West Kalimantan, there was a study of the potential for rare earth elements in the form of 219-ton laterite and additional 443 tons in Sulawesi.

Apart from Adaro, Harum Energy through its subsidiary PT Tanito Harum Nickel has invested in PT Infei Metal Industry, a nickel smelting company. On December 14, 2021, HRUM announced that it had increased its stake in the company by 9.8 percent to 40 percent. There was also PT Resource Alam Indonesia Tbk (KKGI), acquiring two nickel companies: PT Buton Mineral Indonesia (BMI) and PT Bira Mineral Nusantara (BMN). On January 15, 2021, KKGI purchased 70 percent of PT BMI and PT BMN shares with a transaction value of Rp 175 million each. The company projected that next year’s nickel production would increase from 100,000 tons this year to 600,000 tons.

KKGI is also expanding into other mineral mining businesses and studying the project’s economic viability and mineral engineering, especially iron sand. Meanwhile, PT Indika Energy Tbk (INDY) has also just completed the takeover of all paid-in and placed capital in Nusantara Resources Limited (NUS) in early October 2021. As a result, INDY and its subsidiary Indika Mineral Investindo have officially owned a 100 percent stake of Nusantara Resources and Masmindo, a subsidiary of Nusantara Resources holding the contract of work and managing the Awak Mas gold mine.

Source: https://dinsights.katadata.co.id/read/2021/12/20/coal-producers-to-capitalize-growing-ev-market-through-metal-mining