Indonesia's Adaro targets 35 pct growth in coking coal output

JAKARTA, April 23 (Reuters) – Indonesian coal miner Adaro Energy is targeting coking coal output of 1 million tonnes this year, up from 740,000 tonnes in 2017, a company director said on Monday.

That excludes any increase in Adaro's coking coal output that may come from its planned purchase of the Kestrel mine in Australia from Rio Tinto .

Adaro unit Adaro MetCoal Companies (AMC) has 54 million tonnes of metallurgical coal reserves at one of its seven mine concessions in East and Central Kalimantan provinces, AMC Director Priyadi told reporters at a company event.

Altogether, the AMC concessions may hold as much as 1.35 billion tonnes of coking coal resources "with very low ash and sulphur content", according to a statement from Adaro.

Priyadi said AMC is now exploring its other concessions.

"In 2017, AMC focused on increasing semi-hard coking coal sales both in international and domestic markets," Adaro said in the statement.

Thermal coal is used in power plants. Coking or metallurgical coal is sold to steel mills.

Adaro CEO Garibaldi "Boy" Thohir said at the event the company is diversifying away from its thermal coal business, referring to the company's plans to acquire Kestrel.

The Kestrel purchase and increasing output from AMC would support Indonesia's future demand for iron, Thohir said.

"We will study from the mine in Australia," he said.

Besides increasing its coking coal output, the Kestrel acquisition would also provide Adaro with expertise in underground mining that it could potentially apply in Indonesia, where underground mining is still uncommon.

The deal still needs regulatory approval, Thohir noted.

Rio said in March it had agreed to sell its stake in Kestrel, an underground coking coal mine in Queensland state, to EMR Capital and Adaro for $2.25 billion.

The deal was expected to be completed in the second half of 2018, it said.

In 2016, Kestrel produced nearly 5 million tonnes of coking and thermal coal, according to Rio's website, with remaining reserves totalling 132 million tonnes.

The Kestrel deal would represent Adaro's second coking coal mine purchase from an Australian miner.

Adaro acquired a 75 percent stake in the AMC mine concessions, then known as the IndoMet Coal project, from partner BHP Billiton for $120 million in October 2016, amid a slump in metallurgical coal prices.

Adaro had already held the other 25 percent in the project.

Among the concessions is the Maruwai mine, where BHP had aimed to produce 6 million tonnes a year of thermal and coking coal by 2020, an expansion estimated to cost up to $1 billion.

At that time, Maruwai's undeveloped thermal and coking coal resources were estimated at 774 million tonnes.

(Reporting by Bernadette Christina Munthe; Writing by Fergus Jensen; Editing by Joseph Radford and Tom Hogue)