PT Koba Tin Suspends Group Operations in Indonesia, Incurs Losses

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Researched by Industrial Info Resources (Sugar Land, Texas)--PT Koba Tin (PT Koba), a joint venture between Malaysia Smelting Corporation Berhad (75%) and PT Timah Tbk (25%), a publicly listed Indonesia mining company, has decided to suspend its group mining and smelting operations in Indonesia.

In a group statement Issued Tuesday, PT Koba said, "Due to continuing losses in PT Koba Tin and having evaluated the available options, PT Koba Tin has decided to suspend its entire mining and smelting operations to minimize further losses pending the renewal of Contract of Work (CoW)."

The group had compared its pre-tax profit of $15,713 in the second quarter of 2011 to the $6,790 loss in same quarter in 2012 to take this decision, adding that the sustained low prices of Tin in the world market also contributed to it. However, the split reason is blamed on the unusual loss incurred in its operations by PT Koba, which resulted in a third-quarter loss of $12,351 in 2012 compared to its $4,123 profit margin in same quarter in 2011.

Industrial Info gathered that despite attempts by the company to increase mine production, its total production volume continued to diminish, worsened by low prices of tin, hence the big losses.

The decision to suspend operations came ahead of company's group deadline to either renew its CoW, which is billed to expire in March 2013, or have it extended.

In a related development, group parent company Malaysia Smelting Corporation Berhad (MSC) announced on March 9, 2012, that it entered into a strategic alliance agreement with Optima Synergy Resources Limited (OSRL) that would enable OSRL subscribe up to 23% equity interest in Bemban Corporation Limited (BCL), which is the penultimate holding company of PT Koba.

The agreement also requires OSRL to strive for the extension of PT Koba's CoW for 10 years, up to March 2023. If the extension is achieved, OSRL will have the opportunity to increase its stake in BCL up to 60%.

However, all may not go well with the agreement, as Minerals and Coal Director General Thamrin Sihite (Energy and Mineral Resources Ministry) said recently that the government would not extend the PT Koba contract. Thamrin also hinted that the government would likely ask PT Timah to manage PT Koba's 41,680-hectare area.

If Timah takes over, "we will likely be the second-largest tin producer in the world. Currently, the largest producer is China's Yunan Tin and the second is MSC," said Timah Corporate Secretary Agung Nugroho.

Timah now holds a production record of 38,132 metric tons of refined tin as of December 2011, below its capacity of about 50,000 tons per annum. Yunan Tin produced 56,174 tons last year, while MSC reported a consolidated production of 46,599 tons same year.

Closure process at mine site will begin soon.

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