JT 8.2016This article by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange) was published in SGX's kopi-C: the Company brew series on 29 September 2017. The article is republished with permission.

Coal MiningCoal mining operations of Blackgold Natural Resources.
(Photo: Company annual report)

Canadian-born and Indonesian-raised Phil Rickard straddles two worlds.

Having lived in Jakarta from age 11, and enrolled in both Indonesian and American schools, the Chief Executive Officer of SGX-listed BlackGold Natural Resources Ltd is deeply passionate about Southeast Asia's largest economy.

His extensive mining, energy and entrepreneurial experience - stemming from a variety of senior roles in Indonesian as well as multinational firms, including Norway's Norsk Hydro group - stands him in good stead as a conduit between cultures.

"I was raised a Canadian in American schools, and grew up in Asia. Although I wear batik and speak fluent Indonesian, I'm always going to be regarded as a bule," Rickard said, referring to the colloquial term for white foreigners in the country.

LQMB29873Power plants want consistent coal supplies, and we want to be that consistent supplier.

The IPPs are willing to pay for consistency, and as a result, we can build a business with steady revenues and stable margins - that has always been our driving goal.

- Phil Rickard

Blackgold Natural Resources

That's not necessarily a bad thing.

It's precisely these qualities that make the Bachelor of Arts in Philosophy graduate from Washington's Gonzaga University an effective liaison between the East and the West.

"I understand the complexities and intricacies of living and working in Indonesia, as well as the various operational requirements of large Western multinationals.

"I have also developed the ability to get things done, and get them done properly," Rickard said.

He describes the period during the Asian Financial Crisis as critical in reinforcing his understanding of what it takes to build a company with sound fundamentals in Indonesia, especially one that can ride through any tumult.

"I got my PhD in Indonesian business when the crisis struck," Rickard quipped. "Everything came crashing down in the space of a few months, including the Soeharto government."

With those skills, and a network of connections - in both politics and business - painstakingly built up over the last two decades, Rickard is well-placed to take the Indonesia-focused coal miner to its next stage of growth.

"My ability to be a bridge is special, and I embrace that role," he added.

Rising Consumption

BlackGold, which listed on the Catalist board in March 2015, has a market capitalisation of over S$100 million. The company is targeting Indonesia's rapidly growing power plant industry, with a focus on supplying coal to power plants located in Sumatra's Riau province.

It holds the rights to three coal concessions in Sumatra - PT Samantaka Batubara, PT Ausindo Andalas Mandiri, and PT Ausindo Prima Andalas, which span more than 45,550 hectares in combined acreage. The company has, to-date, explored a total area of about 10,000 hectares in the PT Samantaka Batubara concession.

Phil Rickard 1 8.2015

Sumatra and our area of Sumatra needs a great deal more power, and the majority of that is, and will be, coming from mine-mouth plants and/or coal-fired power stations.

- Phil Rickard

Blackgold Natural Resources

(NextInisght file photo)

As of June 2017, coal reserves at the PT Samantaka Batubara concession have more than tripled from last-reported estimates announced in August 2016, according to the latest Independent Qualified Person's Report (IQPR) prepared by BlackGold's independent consultant, PT GMT Indonesia.

PT Samantaka Batubara is estimated to hold 147 million tonnes of coal reserves and 520 million tonnes of coal resources, according to the IQPR, which was prepared in accordance with the Joint Ore Reserves Committee Code (2012).

The low-sulphur and low-ash properties of its coal make it highly suitable for power production.

BlackGold has secured two supply contracts from state-owned firms and another two long-term contracts with Independent Power Producers (IPPs).

Coal is expected to be a vital source in meeting Indonesia's growing domestic electrification needs, as urbanisation and an expanding middle class boost demand across the archipelago.

In 2016, the national electrification rate rose to 91.2%, with national electricity consumption forecast to grow 8.3% annually from 2017 to 2026, according to Indonesian state-owned electricity firm PT Perusahaan Listrik Negara's (PLN) 2017-2026 Electricity Supply Business Plan (RUPTL). Coal will remain a key part of Indonesia's energy mix - about 84 million tonnes are expected to be consumed annually, data from the RUPTL showed.


♦ Focus on Fundamentals

From the start, BlackGold has adopted a slow and steady approach to building its foundations, focusing on long-term contracts with fixed margins, Rickard said.

"We've always stayed away, and guided the company away from, fluctuations in coal prices. That's our key mission statement," he noted.

"We never wanted BlackGold to play the mining spot market or ride the swings - US$20 a tonne versus US$100 a tonne - in coal prices."

Stock price  11.6c
52-week range 2.7c - 19.5c
Market cap S$108.9m
Price/Book 6.09
Price Earnings -
Dividend yield -
Source: SGX StockFacts

The market will reward consistency, and long-term coal demand is indisputable, Rickard added.

"Power plants want consistent coal supplies, and we want to be that consistent supplier.

"The IPPs are willing to pay for consistency, and as a result, we can build a business with steady revenues and stable margins - that has always been our driving goal."

Earlier this month, BlackGold said it raised selling prices by 10% in its long-term offtake agreement with PLN, and the revision would be applied retroactively to coal sales from March 2017.

Another key development for the company is the Riau-1 Project - one of the planned mine-mouth power plants in PLN's 2017 National Electricity Supply Business Plan that's expected to start commercial operations in 2020.

Earlier this month, BlackGold inked an agreement with various parties to set up a new consortium to develop, construct, operate and maintain this coal-fired power plant. The consortium comprises BlackGold, its unit PT Samantaka Batubara, Chinese state-owned power engineering firm China Huadian Engineering, as well as PLN subsidiaries PT Pembangkitan Jawa-Bali and PT PLN Batubara.

Upon the successful award of the Riau-1 Project by PLN to the consortium, the latter would establish a joint venture company to enter into relevant agreements with PLN, as well as carry out construction and commissioning of the project. With an expected tenure of 30 years, the contract would require BlackGold to deliver more than 3 million tonnes of coal per annum.

PT Samantaka Batubara's reported coal reserves are dependent on BlackGold being successful with its bid to supply the Riau-1 Project, the company said in a filing last month, adding there is "reasonable expectation" that its current bid will proceed.

"With nearly 150 million tonnes of coal reserves and over 500 million tonnes of coal resources, we can even do Riau-2. We can supply other IPPs that PLN own and operate, which are in the same zone as we are," Rickard said.

"And when our region has been maximised, we can potentially repeat the same process and business model - signing long-term contracts with fixed margins - for another region, for example, Kalimantan."

The company will target exploration activities to uncover the most profitable pockets of coal located over its three concessions.

"And once we increase our reserves, we will sign more contracts." 


Long Runway

The good news for BlackGold is that it still has a long way to go, he added.

"Sumatra and our area of Sumatra needs a great deal more power, and the majority of that is, and will be, coming from mine-mouth plants and/or coal-fired power stations."

Another priority is to ensure production matches demand. "If we can't keep up, demand will eventually look elsewhere. We need to make sure we don't open the door for potential competitors."

LQMB29873We wouldn't be in Indonesia if we didn't believe there will be consistency in terms of policies and regulations, but does it keep me awake at night? Yes, because it's incredibly complicated. For example, several levels - provincial, district and national - exist in the government, and sometimes people who might have a different focus take on different positions.

- Phil Rickard

Blackgold Natural Resources

"Right now, we're able to meet current market demand, which means we're growing the business at a fairly rapid pace," he added.

In 2015, Indonesian President Joko Widodo unveiled an ambitious 35,000-megawatt (MW) program to boost the country's electrification ratio to 97% by 2019, with about 25,000 MW of capacity expected to come from coal-fired power plants.

Since then, some officials have indicated it might take several more years to achieve this target.

As at end-March, Indonesia's electrification ratio stood at 92%, with Papua - the country's easternmost province - and Nusa Tenggara Timur - the southernmost part of the country - recording the lowest ratios at 48.3% and 59.2% respectively.

In Sumatra, electricity demand is seen rising 11.2% per annum, while in Riau province - the location of BlackGold's assets - the electrification rate is behind the rest of Sumatra, creating future opportunities for power generation.

BlackGold has already done the heavy lifting - putting in place all relevant infrastructure, ranging from its physical mines to corporate and financial frameworks, Rickard said. "Now, we just focus on increasing our clients and coal resources."

In June, the company placed out 66.7 million new shares at S$0.123 per share to raise more than S$8 million in capital. Part of the net proceeds will be channelled into developmental expenses for the Riau-1 Project, while the remainder will be used to boost working capital.

Indonesia's benchmark coal price soared 9.6% month-on-month in September to US$92.03 per tonne, from US$83.97 in August, according to data from the country's Ministry of Energy and Mineral Resources. The reference coal price, also referred to as Harga Batubara Acuan (HBA), is now at its highest since December 2016.

♦ Challenging Complexity

Despite a reasonably bright outlook, challenges remain. The country's developing political situation is an issue that weighs on Rickard's mind.

"Things are changing and improving, and with these shifts, it can be difficult to achieve consistency. And all major business investments require consistency," he said.

"We wouldn't be in Indonesia if we didn't believe there will be consistency in terms of policies and regulations, but does it keep me awake at night? Yes, because it's incredibly complicated. For example, several levels - provincial, district and national - exist in the government, and sometimes people who might have a different focus take on different positions."

Nonetheless, Rickard, who has long felt a calling to live and work in the world's fourth-most populous nation, remains fascinated by the country's convoluted dynamics. "Some people say Indonesia is daunting in its intricacies and complexities, but I actually find it challenging."

"The US was exciting, but it lacked a passion I knew I could find in Indonesia. In a developing economy, you can effect real change, and be involved in projects that have a massive impact on people's lives," he added.

LQMB29873Indonesia is an explorer's dream - after more than 30 years in Jakarta, I still discover parts of the city that amaze me.

- Phil Rickard

Blackgold Natural Resources

Outside of work, the 48-year-old spends his time exploring and hunting antique maps, most of which end up on the walls at home - much to his wife's chagrin.

"Indonesia is an explorer's dream - after more than 30 years in Jakarta, I still discover parts of the city that amaze me," he grinned.

And the discovery process is everything, Rickard admitted. "That's what I love about the mining industry and creating a business - you find a mine or have an idea, and make something of it."

The father of two boys and two girls aged 11 to 16 aims to pass this adventurous spirit on to his children. "I want them to build enough confidence to explore the world themselves, and embrace all that life has to offer."

He also hopes to demonstrate key values by example, and engage them in activities that don't involve a screen.

"How else would you teach your kids the importance of integrity and honesty apart from showing it? And that's not going to happen sitting in front of a TV or playing with the mobile device."

Financial results

Year ended 31 December (US$ '000) 2016 2015 2014
Sales 320 - -
Gross profit 55 - -
Profit for financial year -3,635 -29,190 -364
Profit attributable to equity holders -3,621 -29,169 -358

Quarter ended 30 June (US$ '000) 2QFY2017 2QFY2016
yoy chg
Sales 1,008 158 NM
Gross profit -161 -61 NM
Net profit -1,837 -980 NM
Profit profit attributable to equity holders -1,824 -976 NM

Source: Company data
NM: Not meaningful


Outlook & Risks
  • The Group successfully completed three share placements during 6M2017, raising a total of S$15.0 million, which will be used mainly for working capital and preliminary preparation work on the Riau-1 Project.
  • The Group's subsidiary, PT Samantaka Batubara, completed its 10th shipment of coal by barge to the Tenayan port in August 2017. The shipment was made in relation to the coal sales and purchase contract signed between PT SB and PT PLN Persero. These steady deliveries will continue to generate consistent revenue for the Group.
  • An article published in Bisnis.com, citing a recently issued MEMR Decision (No. 2183 K/30/MEM/2017), stated that coal demand from coal-fired power plants is projected to reach 88.3 million tonnes, which accounts for the majority (81.8%) of Indonesia's Domestic Market Obligation (DMO) for coal. The DMO refers to the regulation requiring coal and mineral producing companies to allocate a certain minimum percentage of their production to the domestic market. In another article published in industry.kontan.co.id, Sofyan Basir, President Director of PT PLN Persero, was quoted as saying that the state-owned electricity company currently needs around 86 million tonnes of coal for supply to mine-mouth power plants. This demand is forecast to increase by another 70 million tonnes by 2020.
  • The Group's contracts for annual delivery of 360,000 tonnes of coal each to PT SMS and PT SDU are expected to commence in 2H2017 and 1H2018 respectively.
  • With the construction of its own jetty expected to complete in 3Q 2017, delivery of coal from this jetty will likely translate into costs savings for the Group.
  • Barring unforeseen circumstances, the gradual ramp-up of coal deliveries to its customers, combined with the continued dominance of coal in the development of domestic Indonesian power generation, will position the Group for further growth.

Blackgold Natural Resources Ltd

BlackGold is an Indonesia-focused coal mining company targeting Indonesia's rapidly growing power plant industry. It focuses on long-term, fixed offtake agreements and has a customer portfolio comprising state-owned and independent power plants and factories. The Group, through its local subsidiaries, has the rights to three coal concessions in Riau, Indonesia. Currently, the Group, through its subsidiary PT Samantaka Batubara, has a coal concession for an area of 15,000 hectares, with over 500 million tonnes of coal resources (estimates are reported in compliance with 2012 JORC Code).


For its 2nd quarter results for the period ended 30 June 2017, click here.

The company website is: www.blackgold-group.com.

The ccompany's Stock Facts page is here.

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