0

PT BAYAN RESOURCES Tbk.

Focusing on Efficiency

Duncan Buchanan

Kalimantan Coal Conference - September 2014

1

www.bayan.com.sg

Bayan Overview

PT. Bayan Resources Tbk listed on Indonesian stock

exchange in August 2008

22 mining concessions covering approximately 145,000

hectares in East and South Kalimantan

13.3 million tonnes of production in 2013. Targeting 13 to 14

million tonnes this year.

Some of the highest calorific value coal in Indonesia

3 independent port facilities including the Balikpapan Coal

Terminal

Leading mining contractors include Thiess, Petrosea,

Leightons and Bukit Makmur

2

Operation Locations

www.bayan.com.sg

3

Why the concern and

need to focus on efficiencies?

4

The concerns

70 Persen Tambang Tutup

Tribun Kaltim, 29 Aug 2014

70% of Mines Closed

5

The concerns

Since 2011, over 35% drop in coal price due to oversupply in

market.

Significant reduction in overburden removal in Indonesia in

2013 means there is approx. 500mBCM of fleet capacity just

sitting around, meaning if there is any increase in coal price

this will be counteracted with an increase in production => this

and other factors means that current prices are here to stay.

Coal price declines over the long term need to be offset by

efficiency improvements.

Year on year inflation of mining costs ranging between 5 – 10%

(labour, spare parts, tyres).

No more easy coal in Indonesia, logistically it’s becoming

tougher.

6

The concerns

• Change in relationship between revenue / cost drivers

7

Mining Costs and Efficiencies

Realistic assessment of mining costs

and efficiencies

8

Mining Costs and Efficiencies

Efficiency is all too often referred to in

operational terms only.

Cost and efficiency go hand-in-hand,

cannot look at one without the other.

Doing something efficiently doesn’t

necessarily mean low cost.

Need to balance practical efficiency with

cost. We can make any activity extremely

efficient with enough resources but need

to keep a handle on the real cost benefit.

What is ‘efficient’ for any mine will

depend upon where it is in it’s mine life

cycle and it’s eventual production target,

i.e. what is efficient for one mine may not

be efficient for another.

9

Assessing Mining Costs

Need to look at all-in mining costs, i.e.

loaded onto customers vessel.

Compare to industry standards (within

Indonesia and the rest of world) but

make sure comparing like for like.

When looking at specific efficiencies,

need to capture and record costs at the

activity level.

Start by looking for the ‘low-hanging

fruit’.

Use independent consultants to assess

current activities and advise where

appropriate.

10

Logistics

Logistics costs – Improving efficiency

throughout the supply chain.

11

Logistics

• Logistics is the key to success in the coal mining industry.

Coal mining is a logistics based

business. Mining is the ‘easy’ part.

If you can’t move the coal to your

customers ship, you can’t sell it.

Identifying logistics options and

constraints should form a key part of

due diligence during concession

acquisition and development.

Logistics routes need to consider all permitting requirements, e.g. crossing

other concessions (mining, timber and agriculture), pinjam pakai, etc., and

land compensation.

When planning the logistics chain, a holistic approach is needed so that

capacities align. Design now for future expansion.

In Indonesia, minimise trucking distance and maximise barging distance.

12

Logistics

Transportation

The majority of significant

coal deposits in coastal

regions of Indonesia are

either being exploited or

being developed.

This means companies are

forced to turn to coal

resources further inland. For example Wahau, Central Kalimantan and

South Sumatra.

As the coal mines move inland, the cost of transportation takes over

as the dominant cost, i.e. ahead of the mining costs.

We are seeing the same in Australia also: the above applies to the

planned development of the Surat and Galilee Basins.

13

Efficiencies

Large efficiency gains can be achieved through capital

expenditure, yielding moves down the cost curve.

Smaller efficiency gains can be achieved through evaluating

and modifying existing processes:

Time and motion studies;

Fuel consumption;

Wasteful expenditure;

Theft and leakages;

14

Efficiencies

Truck size and road quality impact hauling costs.

US$0.20/tonne/km> Operating costs <US$0.08/tonne/km

20 tonne 30 tonne 85 tonne 150 tonne

US$50,000/km > Capital expenditure >US$1,000,000/km

10% < Road Gradients < 4%

15

Efficiencies

Transport methodology

US$0.20/tonne/km Operating costs US$0.02/tonne/km

- Capital expenditure +

+ Flexibility -

Coal trucking Overland conveyor Rail

16

Efficiencies

Other bulk transport methodologies

Railveyor – Narrow gauge light

railway is construct upon which

coal-cars are propelled using

rollers that are stationary

alongside the track

Coal Slurry Pipeline – previously

used in US on commercial scale.

Large volumes of water required

Coal Log Pipeline – Large

experimental

17

Efficiencies

Other ‘transport’ alternatives

Generally require the coal to be

modified from its original form:

Coal upgrading => reduces

moisture thereby improving the

energy content of coal transported

Coal bed methane => transports gas

instead of coal

Coal to oil conversion => transport oil instead of coal

Mine mouth power station => transport electricity, would benefit

from a national / international power grid

All require large capital expenditure and by implication, large coal

reserve

18

Efficiencies

Barge Loading

US$10/tonne Cash Operating costs US$1.50/tonne

- Capital expenditure +

+ Flexibility -

Manual direct loading Simple Integrated (complex)

19

Efficiencies

Barge Size & Capacity

US$0.05/tonne/km Operating costs US$0.01/tonne/km

- Capital expenditure +

+ Flexibility -

180’ 230’ 300’ 300’ self-propelled

20

Efficiencies

New generation, purpose-built tugs and barges starting to appear

Self-propelled

Self discharging barges

Pusher tug / barge configurations

Barges designed with low-draft

21

Efficiencies

Vessel Loading

+ Operating costs -

- Capital expenditure +

+ Flexibility -

Geared vessel Floating cranes Floating Terminal Shore based

22

Efficiencies implemented by

PT Bayan Resources Tbk

23

Mine Planning

One of the single largest cost drivers we

have is the waste haulage distance.

This is dependent on mining sequence and

in-pit and ex-pit OB dumping strategies.

Optimisation of pits and long-term

sequencing is essential to determine the

optimum hauling distance.

We have invested in Minex optimiser and

XPAC scheduling software and training.

We have reduced our group’s overall waste

haulage distance by approximately 500

metres since late 2012.

24

Geotechnical review & slope monitoring

Slope stability analysis of

active and in-active pits

leading to steeper high-walls

in some cases.

Continuous slope monitoring

using Groundprobe SXRS

radar units (used at 4 sites).

Implementation has facilitated

coal mining from areas

otherwise deemed un-safe.

Return on investment

measured in months, not

years.

25

Re-tendering Fuel Supply

Bayan group uses between 250-300

million litres per annum, expected to

increase in coming years.

Historically, Bayan and its contractors

purchased fuel independently and

from a number of sources.

In 2013, we conducted a tender to

amalgamate and award supply to one

company, hence improving our

purchasing power and reducing cost.

Stage I supply has already commenced using each sites existing

infrastructure and includes “Vendor Managed Inventory”.

Stage II will include construction of a fuel terminal adjacent to our

Balikpapan Coal Terminal, reducing costs further in years to come.

26

Fuel Consumption Reduction Strategy

Engaged a consulting team to

assess and assist developing and

implementing a fuel management

control system at one of our

largest mine sites.

Joint taskforce formed with Bayan

and consulting personnel, full

time onsite.

9 month program included all our

contractors.

All aspects were targeted from mining, coal hauling, coal handling,

barging and infrastructure.

This initiative resulted in sustainable reductions and is now being rolled

out across other sites.

27

Reduced Number of Employees

Reviewed all national and expatriate

staffing and re-aligned to current

requirements but with provision for

near future.

Selective relocation / transfer of staff

or retrenchment as a last option.

15 - 20% reduction of total employees

during 2013, with a further 5% in 2014.

Predominantly non-staff.

Not just about salaries and wages -

also has a flow on effect reducing

employee related overheads

(insurance, catering & camp costs,

travel expenses, office expenses etc.)

28

Improved Barge Loading Efficiency

A review of barge loading cycle

times identified inefficiencies,

particularly excessive queuing

times.

Upgraded barge loader capacities

at most sites and installed

additional breasting dolphins

upstream.

Coal Transfer Station on the

Mahakam river to be replaced.

New high-speed, high capacity

transshipping facility ordered for

delivery in late 2014.

29

Barging Efficiency Programme

Conducted a detailed barging

review of selected barging

routes.

The results suggest larger

barges than those we currently

use would be possible. Selected

trials have commenced.

Self-propelled barges identified

as optimal for certain barging

routes.

30

Bulk Dozer Push

Implemented dozer push at 2

sites in 2013, and at a 3rd this

year.

Overburden removal cost per

BCM is approximately 50% of

traditional traditional truck

and excavator.

Will only replace a proportion

of production.

Limited to certain deposits /

seam geometry and mine

designs.

31

Floating Transfer Stations / Terminals

KFT-2 commissioned in 2013,

designed specifically for our

Tabang / Pakar project.

Will be positioned off the

Mahakam delta reducing barging

cycle times.

Design incorporates belt metal

detectors, magnetic separators

and automatic samplers

ensuring quality control during

loading (traditional floating

cranes do not have this

capability).

Twin ship loaders (3,000 tph each) facilitate complete vessel loading

with minimal shifting.

Can load any vessel up to Capesize.

32

Other strategies

Increase third party use of

our coal terminals.

Sheeting coal haul roads to

permit safe operations in all

weather conditions.

Cast / throw blasting.

Wash plant scoping studies.

33

These strategies and improvements are

reflected in Bayan’s continued success.

However:

Our greatest challenge lies ahead…..

34

……….Thank you

Sustaining the improvements

achieved to date as coal prices

improve and production rates

increase…..