It is reported that UK listed Indonesian coal producer Bumi PLC is looking to monetize non core assets to pay down part of a loan owed to China Investment Corporation and other outstanding debt.
Bumi and its associates and subsidiaries are seeking to pay down or refinance high levels of debt to reduce costs at a time when lower thermal coal prices threaten to crimp cash flow generation.
Mr Nalin Rathod CEO of Bumi PLC said that ""We are looking at all options to monetize our non core assets."
Options include PT Bumi Resources selling its 87% interest in Indonesia listed base metals company Bumi Resources Minerals, which was valued in its entirety at around USD 2 billion based on an offer Bumi PLC made in 2011.
PT Bumi may also be able to secure early payment on a USD 231 million loan given to private equity group PT Recapital Asset Management due August 27th 2012. Bumi PLC owns a 29.2% stake in Bumi Resources.
Mr Rathod said BRMS would only be sold at the right price.
BRMS's portfolio of assets includes an 18% economic interest in the Batu Hijau copper gold mine in Indonesia, which is majority owned by Newmont Mining Corporation and several exploration projects in Indonesia and Africa.
Bumi wants to use some of the proceeds from non core asset disposals to repay USD 600 million in debt owed to CIC ahead of an October 2012 deadline. It wants to then refinance the remaining USD 600 million at a lower interest rate.
Mr Rathod said that Bumi is holding talks with CIC, its own banks and other parties to achieve the early repayment.
Mr Rathod said thermal coal prices seem to be bottoming out after having slumped to just over 2 year lows in June 2012. Thermal coal prices dropped in response to weaker demand in developed economies, higher US coal exports, and slowing Chinese economic growth.
Bumi said inventory levels at Chinese ports remain high and there are reports of some distressed cargos of thermal coal.
Mr Rathod said that the price drop is clearly of concern and if prolonged, is expected to have a material impact on the level of profitability. He added that "We are therefore accelerating our efforts at reducing costs and improving efficiencies wherever we can."
He reiterated the company remains committed to achieving its revised production target of 20 to 22 million tonnes of thermal coal at PT Berau and 75 million tonnes at PT Bumi Resources in 2012.
Mr Rathod also said the board of directors asked management to focus on cost cuts and production rather than restructuring the company’s complex corporate structure. He said once the company has secured regulatory and shareholder approval for its restructuring proposal, it will then announce it to the market.
Bumi also said it remains on track to boost its thermal coal production capacity to 140 million tonnes in 2014.
Source - Live Trading News
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