“Despite all the challenges, the Company grew positively, with a total production reaching 78.8 million tons; 56.4 tons from our KCP facility, and 22.4 tons from Arutmin.”

Dear Shareholders and Stakeholders,

After the rough patch we successfully navigated through in 2020, the Company showed progressive performance in 2021. Despite the series of challenges in recent years, we remained passionate about the Company’s performance and about enduring these challenging times. On this occasion, please allow me on behalf of the Board of Directors to elaborate on how we implemented our strategies throughout 2021 to deliver optimal growth in performance.
 

Economic Overview

The global economy was gradually recovering as it reached a growth of 5.7% by the end of 2021. This growth was mainly contributed by the recovery of the United States’, China’s and Euro Area’s economies, which grew 6.9%, 8.1% and 5.3% respectively. Other countries that also posted recovery were Singapore with a growth of 7.2%, Hong Kong with 6.4%, Japan with 5.4%, and South Korea with 4%.

Indonesia was among the countries in Asia that managed to rebound with a growth of 3.7% after a contraction of 2.1% in the previous year. In terms of production, the highest growth was seen in the health services sector and social activities at 10.5%. Meanwhile, in terms of spending, the highest growth of 24.0% was achieved by the export component of goods and services. As the public was increasingly used to the new normal, economic activity has been resumed and more vibrant.

The government through the Ministry of Energy and Mineral Resources (ESDM) noted that domestic coal production in 2021 reached 98.24%, or 614 million tons of the target of 625 million tons. Of this achievement, coal production for domestic needs reached 133 million tons or lower than 22021 target of 137.5 million tons. On the other hand, coal exports in 2021 reached 435 million tons, an increase from 433.8 million tons in 2020.

From a financial perspective, the Company has fully settled the principal and paid the interests of its USD443.8 million Tranche A in 2021. This realization has enabled the Company to strengthen its financial structure and maintain the stability of its overall performance.

World coal prices also continued to increase drastically at 85.6% throughout 2021, and closed at USD151.8/ton. In fact, coal price reached its historic high at USD280/ ton in October 2021. The increase was mainly due to a shortage of supply and an increase in global demand. However, there were also other underlying factors that impacted coal prices, such as extreme winters, global geopolitical issues, unaffordable prices of natural gas, and infrastructure issues in the coal-producing countries.
 

BUMI’s Strategic Performance

Along with the increase in world coal prices, the average selling price of the Company’s coal also increased from USD44.2 per ton in 2020 to USD67.4 per ton in 2021. The Company used this price increase momentum to expand revenue and increase the stripping ratio.

However, the Company also encountered some obstacles, including the heavy rainfall due to the La Nina effect. Facing this circumstance, the Company ensured that mine-water management always complied with the requirements, both in water quality standards and the disposal of water to the river as the receiving agency. In addition to that, the Company also gradually conducted reclamation of ex- mining lands. Heavy rainfall was also one of the factors that caused the Company’s total production to decrease slightly, or 2.9%, from 81.1 million in 2020 to 78.8 million tons in 2021. However, this figure came close to the targets set by the Company, at 80 million tons for the year.

Despite the obstacles, the Company has fully complied with the Domestic Market Obligation (DMO) tariff required by the Ministry of Energy and Mineral Resources (ESDM). Due to the compliance, 2 (two) of the Company’s subsidiaries, KPC and Arutmin, were named amongst the 139 companies that regained permits and access to resume exporting after the ban on export on coal producers was lifted by the Ministry of Energy and Mineral Resources at the end of 2021.

From a financial perspective, the Company has fully settled the principal and paid the interests of its USD443.8 million Tranche A in 2021. This realization has enabled the Company to strengthen its financial structure and maintain the stability of its overall performance. The Company also managed to record an encouraging improvement in performance. Using current reporting standards, the Company’s operating revenues increased from USD790.4 million to   USD1,008.2   million   in 2021, supported by the overall increase in coal prices during 2021. The Company also managed to deliver USD223.4 million in comprehensive net profit for the year, after a comprehensive net loss of USD337.4 million for the year of 2020.

While the COVID-19 pandemic persisted, we also strong positive sentiment from all parties towards normalizing economic and their daily activities. Having observed this positive trend, the Board of Directors then acknowledged the need for strategic and tactical business management. It was by having that aspect that the Company became increasingly able to adapt to and benefit from changes to accelerate its performance.
 
The Board of Directors has leading executive duties and full responsibilities to run the Company, and to formulate, implement and ensure that all business strategies are optimally carried. In the process, we involve our subsidiaries, business units, and related functions to make decisions. Periodically, we conduct field visits directly to assess the conditions. We strive to guarantee efficient decision-making process, such that effective coordination and communication amongst units can be well-established.
 

BUMI’s Business Prospects

We expect to see a gradual increase in the average selling price of the Company’s coal. This price will likely continue due to the escalated tension between Russia and Ukraine, for which no agreement has been reached. The war between Russia and Ukraine has halted the supply of coal from Russia to a number of countries, including Europe and China. This incident allowed Indonesian coal to become the world’s target as a substitute for imports by these countries.

The national coal production in 2022 is targeted at 663 million tons, an 8 percent increase from the realized realization of 614 million tons in 2021. In line with this prediction, the Company targets to increase its coal volume production by 10% to 83-89 million tons, whereas a special commitment is to meet domestic demand and comply with the DMO provisions set by the government. In terms of destination, the Company will prioritize coal exports to traditional destination markets such as China, Japan, Korea, and Taiwan. The Company continuously provides optimal support and contribution to help the Government achieves its stated goals.

The Company continues to support the optimization of BRMS performance. In early 2022, a subsidiary of BRMS, namely CPM, announced the results of drilling activities at a gold mine project in Poboya, Palu, Central Sulawesi. CPM discovered gold ore reserves of 4.6 million tonnes grading 1.19 g/t Au from open pit mining sites on River Reef and Hill Reef as parts of the Poboya Block (Block-1). The construction of a second gold ore processing plant with a capacity of 4,000 tons of ore per day also shows positive progress. Almost all of the main equipments for the factory are expected to arrive in Palu on schedule, in the first quarter of 2022. The addition of gold reserves in Poboya Block will increase the productive life of mine and have positive impacts on value for BRMS shareholders.

We are optimistic that BUMI has a stronger business prospect in the future. In March 2022, KPC officially obtained an operating license extension through the approval of a Special Mining Business License (IUPK) for a period of 10 (ten) years, which can be extended in accordance with the provisions of the legislation. The permit gives the Company a fresh air to sustain the business continuity and make higher contribution to state revenues.

BUMI’s Governance

In managing business challenges and maintaining the Company’s position as the largest mining companies in Indonesia, the implementation of GCG practices plays a vital role in the short and long term. Strong fundamentals and adaptability enable the Company to improve performance in all business lines. On a regular basis, we make improvements and development measures in governance, and continue to improve our infrastructure that supports governance implementation.

The Company has been consistent in strengthening its credibility and reputation through strict compliance with applicable regulations. We are proud that in 2021, the Company through KPC and Arutmin was able to win a number of prestigious awards in the 2021 Good Mining Practices Award organized by the Ministry of Energy and Mineral Resources. In addition, BUMI through Arutmin also won the Darma Abiwara Madya in the 2021 Geominerba Award. This award is given to companies that make the largest contribution to PNBP (Non-tax State Revenue) in the field of HR development and administrative compliance.

With a comprehensive and cohesive governance system, all the Company’s governance organs can carry out their duties and responsibilities appropriately. We enforce the Company’s Code of Ethics which serves to guard every member of the company in their work and behavior, without limiting their development both individually and as a group. During 2021, neither the Company nor all members of the management faced any legal cases. We always ensure that each one of our employees is able to act as growth catalyst through positive performance and talent development.

Changes in Board of Directors Composition

Words failed us to express how sad we were to lose Mr. Saptari Hoedaja, our previous President Director, who passed away on July 4, 2021. Our prayers are with him that God will grant him the best place by His side. We will always use his legacy teachings, passion, and values as we continue to pursue the Company’s sustainable growth.

Based on the decision of the Annual GMS on August 31, 2021, the Company has appointed me, Adika Nuraga Bakrie, as the new President Director and Mr. Rio Supin as Director. We are honored by the trust bestowed upon us, and are ready to work with fellow Directors to advance BUMI in the future.

Accordingly, the composition of the Company’s Board of Directors as of December 31, 2021 was: 

Note: As per Annual Meeting of Shareholders dated 29 July 2022, Xuefeng Ruan and Linjun Zhang are no longer as Board of Directors and have been replaced by Shuyou Dong and Jian Wang (please refer to Management section for their biography)
 

Appreciation

Let us now express our deepest gratitude to the shareholders and the Board of Commissioners who have faithfully taken steps with BUMI from time to time. Our positive achievement also had a lot to do with the roles that our customers, suppliers, business partners, subsidiaries, and employees as they worked with diligence and sincerity. We are determined to continue to grow and achieve solid performance in the years to come.

On behalf of the Board of Directors,
 
Adika Nuraga Bakrie
President Director