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Freeport Woes Prompt Explosives Maker to Seek New Clients
Francezka Nangoy | December 12, 2011

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Mining contractor Ancora Indonesia Resources is targeting as much as $100 million worth of new contracts next year to diversify its client base after experiencing a major set back from its sole client, Freeport Indonesia.

“We’ve learned this year that we cannot rely on one client only,” Ancora’s president director Dharma Djojonegoro said on Monday.

Freeport’s workforce has been on strike for three months, which he said has resulted in a 50 percent cutback in the volume of explosives consumption, Ancora’s main product.

Dharma said the company is currently courting three or four big miners in Indonesia hoping to secure $50 million to $100 million worth of contracts.

Recently, he said, the company, through is subsidiary Multi Nitrotama Kimia, had secured $75 million from coal miner Adaro Energy to supply the explosive ammonium nitrate and mining services for the next three years. It also won another three-year contract worth $25 million from Asmin Koalindo Tuhup, a subsidiary of coking coal miner Borneo Lumbung Energy & Metal.

He said these two new contracts will patch up some of the losses caused by its main client, which Dharma confirmed as gold and copper miner Freeport Indonesia. According to its financial report posted on the Indonesia Stock Exchange, in the first nine months of this year the company recorded a net loss of Rp 5.97 billion ($663,000), compared to a Rp 13.21 billion net profit in the same period last year.

“I have to admit, this is not a good year,” Dharma said. Besides, the force majeure from Freeport, the company has had to deal with the increasing price of ammonia, which accounted for up to 70 percent of the company’s total production costs. He said the price of ammonia had increased by $150 per ton this year.

“We usually pass on the increasing costs to our customer, but the price increase is just too significant and of course there is a time gap for that,” Dharma said.

Rolaw Samosir, finance director at Multi Nitrotama Kimia, said that Ancora estimates that its ammonium nitrate sales will reach 170,000 tons this year, lower than the 177,000 tons in sales last year.

However, the company is optimistic about next year’s performance, expecting 20 percent growth in sales in 2012, above the estimated 10 percent growth across the industry, Rolaw said.

The income will be helped by the completion of its second ammonium nitrate plant, which will increase its production to 150,000 tons from 37,000 tons last year. “This way, we can reduce costs from the imported products,” Rolaw said.

The company has set aside Rp 100 billion for capital expenditure next year, including about $5 million to construct a detonator assembly factory in East Kalimantan.