Stone & coal interests
The group has made loans to certain Indonesian companies with interests in stone deposits and 2 coal mining concessions, all of which are located in East Kalimantan in Indonesia.
The andesite stone and coal mining concessions are held by Indonesian companies, which are wholly owned by the group’s local partners. Stone quarrying is classified as a mining activity for Indonesian licensing purposes and is subject to the same regulatory regime as coal mining.
Historically, the group had the right, subject to satisfaction of certain conditions to acquire 95% of the concession holding group of companies at the local partners’ original cost. The concession holding companies were ﬁnanced by loan funding from the group originally on terms such that no dividends or other distributions or payments could be paid or made by the concession holding companies to the local partners without the prior agreement of the group. However, changes to the Indonesian regulatory regime applicable to foreign investment in mining since the arrangements were agreed in 2008 mean that, since 2014, the applicable conditions can no longer be satisﬁed in their existing form. In the meanwhile, the group has continued to provide loan funding to the concession holding companies. The andesite stone concession holding company has guaranteed the obligations to the group of the coal concession holding companies.
The coal interests date from between 2008 and 2010. In 2012, the group concluded that coal mining and trading have specific complexities that are not shared by the group's agricultural operations and decided to limit further capital commitment to coal and to concentrate on maximising recoveries of the amounts already invested. Then, in 2014, in light of a substantial fall in international coal prices, coal activities were suspended until 2017 when coal prices began to recover. In 2019, the principal coal concession holding company appointed a contractor to provide mining services and manage its port facility, as well as funding all further expenditure in exchange for a participation in profits from the mine.
Coal mining activities resumed in 2021 with sales commencing in 2022. It is the group’s intention to maximise the recovery of monies invested in the coal concession holding companies and to withdraw from such coal interests as soon as practicable.
Stone interests are complementary to the group’s plantation interests because quarried stone represents a valuable resource for buildings and for improving the durability of infrastructure. In addition, stone offtake arrangements have been agreed with a neighbouring coal company to build a hauling road through the group’s estates. Looking further ahead, local civil works for government projects in East Kalimantan are likely to require large quantities of crushed stone.