Proposed Solution of Operational Strategy to Improve Coal Production: A Case Study of Sambarata Mine Operation
Raihan Muflihhamim1*
1 School of Business & Management, Institute Technology of Bandung, Bandung, Indonesia
*Corresponding Author: [email protected]
Accepted: 15 December 2022 | Published: 31 December 2022
DOI:https://doi.org/10.55057/ijbtm.2022.4.4.9
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Abstract: PT. Berau Coal is one of the largest coal companies in Indonesia and Sambarata Mine Operation (SMO) is one of the concession areas of PT. Berau Coal. In 2022, the government approved Annual Work Plan and Budget (RKAB) for company’s coal production of 33,000,000 tons However, based on production parameters, Berau Coal is only able to accommodate as much as 26,000,000 tons. The purpose of this study is to identify and analyze operational strategies that could impact coal production in the Sambarata Mine Operation with the current production parameter plan, that suitable for current and future conditions, and determine the implementation plan and strategy performance indicator of the strategy.
According to external research analysis, coal prices will remain high in 2022, the global economic recovery will lead to an increase in coal demand, and external parties will have a significant impact on the coal industry. The internal resources of the Sambarata Mine Operation show that there are huge additional coal reserves to improve coal production with support from engineers and contractors. The findings are, the SO and WO strategies are consistent with the economic situation, which predicts that the global economy's recovery will result in high prices and increased demand. The ST and WT strategies are consistent with the global coal industry condition, in which external parties will have a significant impact on the coal industry, requiring PT. Berau Coal must plan for the worst-case scenario. The strategy will be implemented by prioritizing the strategy with the greatest impact on increasing coal production while also being the easiest to implement. In general, the indicator of the strategy's performance will be measured by the actual production in the Sambarata Mine Operation and refer to the actual global economic condition in 2022 and the coal industry demand, especially in the Chinese market.
Keywords: coal, optimization, coal production, operational strategy, performance indicator ___________________________________________________________________________
1. Introduction
Mining is a series of research, management, and exploitation of mineral or coal, which are generally carried out, starting from the general investigation, exploration, feasibility studies, construction, mining, processing, refining, transportation, sales, and post-mining activities.
Mining industry has special characteristics which are big capital cost, long pre-production period, high risk, non-renewable resources, and encouraging economic growth.
The various methods of mining a coal seam can be classified under two headings, surface mining and underground mining. Surface coal mining generally involves the following
sequence of unit operations: (1) clearing the land of trees and vegetation, (2) removing and storing the top layers of the unconsolidated soil (topsoil), (3) drilling the hard strata over the coal seam, (4) fragmenting or blasting the hard strata with explosives, (5) removing the blasted material, exposing the coal seam, and cleaning the top of the coal seam, (6) fragmenting the coal seam, as required, by drilling and blasting, (7) loading the loose coal onto haulage conveyances, (8) transporting the coal from the mine to the plant, and (9) reclaiming lands affected by the mining activity.
1.2 Global Coal Industry Condition
The International Energy Agency (IEA) in a report titled "Coal 2021" projects estimates of coal demand, supply, and trade in the world until 2024 stated that coal faced a challenging 2020 prognosis even before the pandemic. The demand for coal decreased globally by 4.4% in 2020, which was the highest reduction in many decades but less than previously anticipated. This decline was attributed to economic recovery elsewhere and a cold spell in Northeast Asia in December. In 2020, spot-traded thermal coal prices had fallen to USD 50 per ton in the second quarter of 2020, down by around 50% over an 18-month period. They stayed around the same level through the third quarter. In 2021, especially during the first half of the year, coal consumption increased and coal production was unable to keep up, reducing stock levels and driving prices higher. Coal prices reached record highs in 2021 under pressure from low demand and low natural gas prices. Early in October 2021, coal prices reached all-time highs, with imported thermal coal in Europe, for instance, reaching USD 298 per ton. Prices quickly changed as a result of the Chinese government's quick policy intervention to balance the market. European prices were around USD 150 per ton as of mid-November. In 2022, coal production is anticipated to hit a record high before plateauing as demand declines. On the basis of Southeast Asia's promising economic outlook, a few new coal power plants (particularly in Vietnam and Indonesia), and Indonesia's cheap coal supply, an annual growth rate of 4.3% is predicted thereafter, pushing consumption to 420 Mt in 2024.
1.3 Indonesia Coal Industry Condition
Coal production in Indonesia is carried out by SOEs, foreign/domestic private companies and small-scale companies, including cooperatives based on Contract of Work agreements, Coal Contract of Work (PKP2B) and Mining Business Permits granted by the Central Government, Provincial Government and Regency/City Government. Indonesia has reserves of coal resources of 147.6 billion tons spread across 21 provinces.
In 2021 data released by Indonesia Coal Mining Association (ICMA), coal production in Indonesia from 2016-2022. It can be seen that the annual production in Indonesia continues to increase where the production target in 2022 is 663 million tons. The production is divided into export and domestic. Domestic is a policy on prioritizing coal supply for domestic needs, called Domestic Market Obligation (DMO). In 2021, the Indonesian government has set a regulation on coal sales for DMO at least 25% of production per producer.
Coal production in Indonesia has been exported to several countries, especially in Asia, namely China, India, South Korea, Japan, Taiwan, and others. China is the destination with the highest number of exports in recent years and second, namely India, which is the destination with the second highest number of exports.
Coal is a commodity that has high price fluctuations. And recently, during the COVID-19 pandemic, which caused export destination countries to go into lockdown condition, this had an impact on coal prices. The historical coal prices from 2019-2022, that in 2020 the price
decreased to 49.42 $/ton. However, in line with the improving pandemic conditions, in the last year the increase in coal prices reached its highest point in March 2022 at a price of 288.4 $/ton.
Figure 1: Main Destination Countries for Indonesian Coal Exports (APBI-ICMA, 2021)
1.4 Company Profile
PT. Berau Coal (PT. BC) is a company that holds a Coal Mining Concession Work Agreement (PKP2B) with number J2 / JI.DU / 12/83. PT. Berau Coal have established a good reputation as an exponentially reliable supplier of coal with consistent quality to Asia market. Other than the domestic market, PT Berau Coal sells its coal mainly to the Asian market. The main market share of PT Berau Coal is power generation companies, both domestic and international, such as China, Taiwan, India, Bangladesh, Malaysia, and others. In 2021, China was still the largest market for PT Berau Coal’s coal sales with a composition of 45.5% of the total sales. Then, followed by Taiwan at 10.7% and India at 9.8%.
Sambarata Mine Operation (SMO) is one of the concession area of PT. Berau Coal. Sambarata Mine began production in 2000 with the quality of the coal produced being Mahoni, Mahoni B, and Agathis. The Sambarata mining area is divided into Block B and Block B1. Sambarata Mine Operation consists of several pits, namely Pit C2HN, Pit C2HS, Pit T4Ext, Pit T4U, dan Pit C2. Total estimation of coal reserve in Sambarata Mine Operation is 21Mt, it was calculated in 2021.
1.5 Problem Exploration
To carry out planning every year, the company always submits the Annual Work Plan and Budget, hereinafter referred to as the Annual RKAB, which is the work plan and budget for the current year in the Mineral and Coal Mining Business activities, which include business aspects, technical aspects, and environmental aspects.
In 2022, the government approved RKAB for PT. Berau Coal's coal production of 33,000,000 tons. However, based on production parameters PT. Berau Coal is only able to accommodate as much as 26,000,000 tons.
According to CEOs, directors, general managers, and senior managers. They anticipate that coal circumstances would improve in 2022 compared to the previous year; therefore, they wish to maximize coal production in compliance with permits issued by the Indonesian government.
Because 2021 is a challenging year owing to the global pandemic of COVID-19, coal demand will fall because numerous countries will cease and restrict coal production.
According to the manager level, the issue in mining operations was the state of the underperforming unit. The difficulty stems from the number of available units, poor unit utilization, and the number of personnel affected by the situation of 2021, so that the number of personnel lost in 2021 cannot be restored in 2022 due to the lengthy recruitment and selection process. Consequently, the current output achievement represents the actual production under the current operational conditions.
In making the production plan, the party involved in the annual planning is the Mineplan Engineer. According to Mineplan Engineer, in making a production plan, there are several factors that affect production capacity. As explained in Chapter 1, to determine a production capacity, there are several parameters: Physical Availability (PA), Utilization Availability (UA), Productivity (Pdty), and Quantity of Unit (Q). Physical availability can be affected by the number of available mechanics, so that the maintenance and repair process takes longer, so that the time required for units that are ready to be used will be longer. Utilization availability depends on the effective working hours, which is affected by operation delays and weather factors so that active units cannot produce. Regarding productivity, unit capacity affects productivity. And for the quantity unit, it includes the number of operators available to operate the unit. And there are also other factors, namely the number of calculated and verified coal reserves. The coal reserves refer to the accuracy of the geology model. This accuracy can be measured by the actual conditions that exist in the form of coal continuity, coal thickness more than 30 centimeters, number of coal seams, and coal elevation. If a geological model has low accuracy, it means that the actual condition of the geological model does not match the geological model in the initial planning. However, related to the problem of increasing production, according to the Mineplan Engineer, related to unit improvement, it will take a long time, at least 6 months, to improve all production parameters, especially regarding PA, quantity, and manpower. So it is necessary to increase production from existing resources in the form of coal seams, which can be maximized from several existing pits.
Based on the issues obtained from all stakeholders, in the table below shown the summarized issue from all stakeholders.
Table 1: Stakeholder Issues
Stakeholder Issue
CEO • Improve coal production in 2022 compared to the previous year; therefore, maximize coal production in compliance with permits issued by the Indonesian government.
Director
General Manager
Manager • The difficulty stems from the number of available units, poor unit utilization, availability of sparepart, and the number of personnel affected by the situation of 2021
Engineer • Related to unit improvement, it will take a long time, at least 6 months, to improve all production parameters, especially regarding PA, quantity, and manpower.
• Necessary to increase production from existing resources in the form of coal seams, which can be maximized from several existing pits.
• Coal reserves only calculated for thickness more than 30 cm.
1.6 Objectives
The objectives of this research is to identify operational strategies that could impact to coal production in Sambarata Mine Operation PT. Berau Coal with current production parameter plan, the details objectives as follows:
1) Determine strategy that may affect to coal production in 2022 in Sambarata Mine Operation.
2) Analyze the strategy for increasing coal production in Sambarata Mine Operation that is appropriate for current and future conditions.
3) Determine the implementation plan of the strategy in 2022 in Sambarata Mine Operation
4) Determine the strategy performance indicator that will be implemented in Sambarata Mine Operation.
1.7 Scope and Limitation
This research scope focuses on the strategy formulation in Sambarata Mine Operation by collecting primary data through stakeholders' interviews and secondary data with the constraint of gaining production in Sambarata Mine Operation through the operational strategy in Sambarata Mine Operation. As a result of the fluctuation in coal prices, the research has limitations in terms of financial or price projection and condition. The research will discuss the feasibility of the operational strategy through a TOWS and Winning Strategy analysis.
Furthermore, this study relies heavily on internal data and contains no statistical tests.
2. Literature Review
The research of Analysis on the Current Situation and Future Outlook of Coal Market in Indonesia by Li (2020) explains that Indonesia is now the world's fourth largest coal producer with a total annual coal production capacity of more than 130 million tons. It is the largest producer and exporter of coal in southeast Asia and the year-on-year growth rate of coal production is much higher than that in other countries. In recent years, Indonesia has continued to attract relatively fast growth of foreign investment, especially since the 2008 international financial crisis, with an annual growth rate of over 13%. For the Indonesian miners, once the contract is signed, they can get a considerable amount of working capital to support the later operation of the project. In Indonesia, where any mine is now precious, investors can take advantage of the mindset that few miners are willing to give up their long-term interests in exchange for a one-off transfer of mining rights. Indonesia's electricity market is becoming more market oriented. The opening up of power generation to private capital has attracted investment from local and foreign companies from China, Japan, South Korea, Malaysia, India and Europe in the research result of Li (2020).
The research of a macro- and microeconomic analysis of coal production in China by Tang et al., (2017) shows based on the macroeconomic analysis the primary production of coal in China increased before 2014 and then decreased in 2014. Significantly, the ratio of total coal production to total coal supply as a source of primary energy declined overall, indicating a decline in the direct relationship between production and supply of coal. Insufficiently direct coal supply is the result of a decrease in coal stock, which was used to bridge the gap left by decreased production. Additionally, the increase rate of coal production is similar to the pattern of investment in coal mining and processing. The distribution of coal production in these areas in 2013 was unbalanced, which is comparable to the variations in coal reserves in different geographical provinces in China. The microeconomic research showed that between 2007 and 2009, the average output value of businesses in China's coal mining and washing industry grew.
As a result, rather than in the production process, China's coal stock declined in 2008, with commercial value chains seeing the biggest decreases. In order to operate profitably, businesses sought a higher profit margin, and from 2007 to 2009, the average profit of businesses in the coal mining and washing sector rose. The output elasticity of capital and labor remained constant, indicating that there was little change in coal producing technology. Due to the features of coal reserves as natural resources, decreasing returns to scale that were calculated through empirical studies suggested that coal output should be affected by coal reserves.
The research of Sales Forecasting and Coal Mining Planning in The Context of Hard Coal Production Strategies by Rybak and Manowska (2017) explains that essential elements shaping the demand for hard coal are:
a) Economic growth and associated therewith development of manufacturing, especially the production of electricity, heat, steel.
b) The effectiveness of new techniques and technologies introduced to reduce the production energy intensity.
c) Advances in the heating industry technology.
d) The share of natural gas and fuel oil in covering the needs of industry, processing and municipal sector.
e) Preferences of individual customers in the selection of fuel.
f) Competitiveness of coal substitutes
These factors should be considered during the determination of sales, and coal mining volumes forecast.
The research of Sales Forecasting and Coal Mining Planning in The Contect of Hard Coal Production Strategies by Rybak and Manowska (2017) explains that created forecasts and environment scenarios allow the verification of proposed strategies. This facilitates the selection of an appropriate, optimal strategy, which will allow the company to survive and develop. The level of demand for hard coal varies throughout the year in each quarter, because coal mining in Poland is subject to very strong impact of seasonality, which is a threat for the mining industry (Rybak and Rybak, 2016). In order to eliminate or mitigate the negative impact of seasonality the following strategies can be used:
a) The production adjusted to seasonal fluctuations.
b) The elimination of seasonal demand changes by mining stabilization.
c) The production of goods characterized by other peaks of sale
d) The introduction of hard coal to markets characterized by a lack of seasonality or complementary seasonality
e) The mining stabilization and use of "seasonal pressure " by raising the level of production during periods of increased coal demand.
3. Methodology
The research using qualitative method by collecting primary and secondary data. Primary data gathering entails carrying out research independently and utilising the results for the intended objective. Secondly, secondary data is a collection of information that the author obtains through a survey conducted by a third party that is relevant to the circumstance that the author will examine as a source of data that could indicate the condition.
The term "primary data" refers to information that the author has independently gathered, either through informal interviewing techniques or directly from experience in the subject matter
under study, such as through participation in internal meetings at the CEO level that address production performance. Ensuring that the interview questions are pertinent to the study's needs as opposed to data obtained by obtaining secondary data from multiple sources, data directly collected by the author are more accurate. From December 2021 to March 2022, every methodology was used.
4. Analysis
This research is conducted using data from primary and secondary sources. The author processes these data for use in an analysis. In each analysis, the author's evaluation is used to determine the outcomes of the research analysis.
4.1 PESTEL Analysis
Political, Economic, Sociocultural, Technology, Environmental, and Legal (PESTEL) factors is identified that related to the business issue that might have an impact to global coal industry.
Political Factors
The policies in Indonesia have a significant impact on the coal sector. Perfecting Domestic Market Obligation (DMO), which requires producers to sell a portion of their domestic output at a predetermined price, is one of these solutions (not the market price). The sector's regulator, the Ministry of Energy and Mineral Resources, has instructed coal companies to reserve a specific portion of their output for domestic use in order to achieve energy security and independence. The Ministry of Finance's Directorate-General of Customs and Excise sets export levies, which the government employs to limit the quantity of coal that leaves the nation.
At the end of December 2021, the Indonesian government released a number of policies about exporting coal. These policies came in the form of letters from the Ministry of Energy and Mineral Resources' Directorate General of Mineral and Coal.
The world's largest producer, consumer, and importer of coal, China's decision to abandon it will have a significant impact on how effectively the rest of the world combats climate change.
China has pledged to become carbon neutral by the year 2060 and to reduce its use of coal beginning in 2026. However, experts assert that in light of recent events, China might be reluctant to make any further commitments to reduce carbon.
In 2015, nearly 200 countries signed the Paris Agreement, making a promise to deal with the climate crisis and work to improve climate mitigation, adaptation, and climate finance. To reach the goals of the Paris Agreement, we need to quickly cut back on fossil fuel use.
Coal is still the primary source of electricity in some nations. However, since numerous governments are working to remove carbon dioxide from the energy system, coal use will significantly decrease over time. Indonesia and other nations that produce and use coal must be prepared for this. The value chain and long-term coal production will be impacted by the declining coal demand. Additionally, as nations strive to achieve their Net Zero objectives while transitioning to a low-carbon economy, they must prepare for structural economic changes.
Economic Condition
The rise of the coal sector is offset by the increase in coal prices on the market. The increase in coal prices cannot be separated from the global economic recovery, which has led to an increase in coal demand since 2020, while production is still attempting to recover from the
Covid-19 pandemic. In 2021, the average coal reference price reached 121.5 US dollars per ton, an increase of 63.3 US dollars per ton or 108.5% compared to 2020's price of 58.2 US dollars per ton.
Sociocultural Forces
Relationships with the neighborhood, the presence of the coal industry in the communities must promote positive values and take into account the needs of all parties. The appearance of protests, complaints, or other actions from the neighborhood that could obstruct the operations of the coal industry.
Technological Factors
Another area of technical advancement with varying effects on coal is the revolution in oil and gas extraction over the past ten years, hydraulic fracturing (fracking) combined with accurate horizontal drilling, and the exploitation of unconventional gas resources. These changes have had a significant impact on the availability and cost of natural gas in the United States.
Environmental Forces
In the early months of 2022, the mining sector encountered a number of completely unforeseeable weather-related issues. Due to the influence of the coal industry on global warming, some sectors of the mining industry have long come under fire.
Legal Factors
Laws and regulations are all types of laws and regulations promulgated and declared valid for the Board of Directors of Issuers or Public Companies, including for the coal industry. The description of the amendments to laws and regulations in Indonesia that significantly impact the coal industry performance
4.2 Internal Analysis
This section will discuss the detailed Internal Resources Analysis of Sambarata Mine Operation PT.Berau Coal. The data was obtained from interviews with the mine manager, mine engineer, and pit geologist. Resources are divided into tangible and intangible assets that focus on increasing coal production.
Tangible assets in Sambarata Mine Operation are:
a) Area of Optimization: Sambarata Mine Operation has only one optimization area. The area is Pit T4U that can be exposed to the deeper level. The initial plan of Pit T4U is to expose coal to an elevation of 40, but with further analysis, Pit T4U can be exposed to an elevation of -70. The characteristics of Pit T4U are that its coal seam has the highest coal thickness of up to 7 meters
b) Unit Population: The actions that are carried out in mining operations are broken down into various categories, including OB Removal, Coal Getting, Coal Hauling, and Support Activities. Each of these categories makes use of a different set of units.
c) Additional Coal Reserves: The increased coal reserve will be computed by the pit geologist within the scope of the optimization area described earlier. Prior to that, reserves referred to an amounts of coal that, according to geological surveys and engineering studies, are believed to exist with an extremely high degree of certainty.
As a result, reserves are mineable and economically viable at this point in time. The additional reserve that has been calculated is 250,000 tonnes. Other aspects of additional reserves that Pit Geologist has been mentioned in the interview is the Thin Coal and Mineout Coal. Thin coal is a coal seam that has thickness less than 30cm.
Mineout coal is the residue from the mining process which leaves a coal floor that can be maximized. If the Thin Coal and Mineout Coal is calculated, the total additional reserves from thin coal and mineout coal worth 53,000 tonnes
d) Financial: The ability of the company to generate profits from its operations is revealed by profitability ratios, which are financial indicators. An improved company's performance in generating profit from one period to the next is demonstrated by a higher profitability ratio. The liquidity ratio in 2021 shows the same value as in 2020, which is 1.1 times. This condition indicates that the Company’s ability to meet its current liabilities in a timely manner is well maintained.
Intangible assets in Sambarata Mine Operation are:
a) Contractors: PT Berau Coal’s coal mining and hauling operations are in majority conducted by subcontractors. Such step is taken so that PT Berau Coal can focus on planning and supervision activities, in addition to optimizing the capital expenditures.
Cooperation with subcontractors is built intensively in order to ensure compliance with the Health, Safety, and Environment Standards set by PT Berau Coal.
b) Engineer: The employees in various competency related to the sustaibility aspects according to needs. The employee divided into two types non-technical skills and technical skills. The employee position majority in supervisor and superintendent position, which is the technical and non-technical skill is good. In operation the total employee in Sambarata Mine Operation more than 20 people, which has the most employees compared to other sites.
c) Coal Brands: The type of coal produced by the Sambarata Mine Operation has a calorific value of 5,000 kcal/ kg to 6,000 kcal/kg on a gross as received basis. The coal is marketed under three names, namely Mahoni, Mahoni-B, and Agathis and it has already world-wide known.
Sambarata Mine Operation PT. Berau Coal will have a sustainable competitive advantage because the company has the ability to produce more high-quality product, which will result in higher revenue because the market price for high quality is high.
4.3 SWOT Analysis
SWOT analysis to analyze the data from internal and external issues that have been identified in the previous section. The internal analysis included strengths and weaknesses obtained from the internal analysis. The external factors included opportunities and threats obtained from PESTEL analysis.
Table 2: SWOT Analysis
Strength
a. SMO has additional coal reserves 250,000 tonnes in optimization area b. SMO has Thin Coal and Mineout Coal 53,000 tonnes
c. SMO has many unit population to support optimization area, Thin Coal, and Mineout Coal
d. Improved company's performance in generating profit from one period to the next is demonstrated by a higher profitability ratio in 2021
Weakness
a. SMO only have one optimization area that can improve coal production massively b. The contractors have never done coal getting Thin Coal and Mineout Coal, so the
experience or technical skill is low
Opportunities a. The reference coal price in 2022 remain high
b. The global economic recovery that led to an increase in coal demand
Threat
a. Indonesian government has huge impact to the coal industry if they make a decision such as export ban or other regulation
b. Coal demand for export market depends on China as the biggest consumer and importer
c. Agreement to cut fossil fuel use and shifting to low-carbon d. Operational in Coal Industry depends on the weather
4.4 TOWS Analysis
The SWOT analysis obtained from the previous section will be used as input for TOWS matrix analysis. In TOWS analysis, the four factors in the SWOT analysis will be shown and paired with other factors in the form of a matrix, thus creating four outputs, namely, strength- opportunity (SO), strength-threat (ST), weakness-opportunity (WO), and weakness-threat (WT).
By doing TOWS Analysis, there are four strategies that can be used by Sambarata Mine Operation in 2022.
1) SO Strategy: Build a Improvement Strategy named Project Improvement Program (PIP) that involves an improvement project of gain coal production during economic recovery and remain high coal price.
2) WO Strategy: Plan expertly and enhance contractor abilities when working on projects to increase coal production.
3) ST Strategy: Coal stock management in anticipation of a significant drop in demand 4) WT Strategy: Contingency plan or strategy focuses on optimization that has biggest
reserve and low cost and Maintain relationship with external stakeholder (Government, China, and Regulator).
Table 3: TOWS Matrix
4.5 Winning Strategy Analysis
In Winning Strategy Analysis, the strategies that have been done in TOWS analysis are analyzed based on the fit test, competitive advantage test, and performance test. Based on TOWS analysis, the winning strategy is as follows.
Table 3: Winning Strategy Analysis
Winning Strategy
Fit Test a. The SO and WO strategies are consistent with the economic situation depicted in Table IV.1, which predicts that the global economy's recovery will result in high prices and increased demand.
b. The ST and WT strategies are consistent with the global coal industry condition, in which external parties will have a significant impact on the coal industry, requiring PT. Berau Coal to plan for the worst-case scenario.
Competitive Advantage Test a. Sambarata Mine Operation is capable of producing more high- quality products that will generate high revenue because the market price for high quality is high.
Performance Test a. The performance will be measured by the actual production in the Sambarata Mine Operation, which refers to the actual global economic condition in 2022 and the coal industry demand, especially in the Chinese market.
Based on the analysis above, the strategies taken is feasible and a winning strategy to run in accordance with the conditions that have been analyzed.
5. Conclusion
Based on the results of the analysis in this study, the conclusions related to the research questions obtained are as follows:
1) The Sambarata Mine Operation's strategies for increasing coal production in 2022 are based on external and internal conditions. The strategy is divided into four categories based on the TOWS Analysis. The strategies are as follows:
a) Improvement Strategy named Project Improvement Program (PIP) that involves Pit Optimization, Thin Coal Optimization, and Mineout Coal Optimization to gain coal production during economic recovery and remain high coal price.
b) Plan expertly and enhance contractor abilities when working on projects to increase coal production.
c) Coal stock management in anticipation of a significant drop in demand
d) Contingency plan or strategy focuses on optimization that has biggest reserve and low cost and Maintain relationship with external stakeholder (Government, China, and Regulator).
2) The strategy will be suitable based on internal conditions if the company has an economically valuable additional reserve and the risk is acceptable. The main strategy that has been implemented has revealed that the Sambarata Mine Operation has 303,000 MT of additional reserves with economic value, and the ease of implementation is lower than normal effort. On the other hand, the strategy will suit external conditions if the condition is as previously predicted during the recovery economic condition, which will result in increased demand and high prices. And also, the strategy will be suitable if the future condition of the coal industry is going down due to external factors that have a
huge impact on the industry, such as government regulation, Chinese regulation, a low- carbon agreement, and weather conditions.
3) The strategy will be implemented by prioritizing the strategy with the greatest impact on increasing coal production while also being the easiest to implement. The SO strategy has the greatest impact on increased coal production, with a target of 303,000 metric tons to increase coal production in the Sambarata Mine Operation by 2022. The WO, ST, and WT strategies cannot be measured by volume, but they have benefits for the project and for PT. Berau Coal. But the SO and WO strategies must be implemented simultaneously because they are related to each other. For the ST and WT strategies, the contingency plan is to sustain the mine operation. During the implementation of the strategies, the SMO Department and contractors will monitor the implementation plan on a weekly basis. The reporting was then forwarded to the GMO Department. The improvements' progress will be discussed in the weekly ISC meeting.
4) In general, the indicator of the strategy's performance will be measured by the actual production in the Sambarata Mine Operation and refer to the actual global economic condition in 2022 and the coal industry demand, especially in the Chinese market. In particular, the indicator of strategy performance must be quantitative and qualitative, based on each strategy's impact. The quantity indicator for the strategy's performance is based on a total coal volume gain of 303,000 MT in 2022, of which 250,000 MT is from pit optimization and 53,000 MT is from thin coal and mineout coal optimization.
If the SO and WO strategies are successful, the volume will be achieved. The indicator of the strategy's performance in terms of quality, especially in the WO, ST, and WT strategies, is the sustainability of the whole mine operation. In this example, the coal delivery in coal handling went smoothly without any problems due to safety issues, overstock, or interruptions from external parties. Mine Engineer will monitor and report on performance on a weekly basis. The indicator performance will be reported to the GMO Department, and the GMO Department will present to top-level management at the weekly Integrated Steering Committee (ISC) meeting.
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