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Source: Reuters

INTERVIEW-Thai Banpu says higher costs to hit coal profits

Published: 01 Feb 2010 20:33:22 PST

BANGKOK, Feb 2 - Banpu <BANP.BK>, Thailand's top coal miner, expects profits from its coal business in 2010 to be lower than last year due to higher costs, but its chief executive is bullish about the outlook for high-quality coal prices.

Revenue this year should be close to 2009's estimated 57 billion baht ($1.7 billion) despite a 12 percent rise in sales volume to 23 million tonnes, Chief Executive Chanin Vongkusolkit told Reuters, blaming the strength of the baht versus the dollar.

"It will be difficult to have a bottom line for our coal business close to last year's because our costs are rising," Chanin said in an interview.

Banpu, also Indonesia's fourth-largest coal miner with five mines there, has already fixed selling prices for half of its coal sales this year based on 2009 prices, which were lower than market prices this year.

The widely watched Australia Barlow Jonker Index (BJI), a gauge of spot thermal coal prices, averaged $75 a tonne in 2009. Prices of high-quality coal are expected to rise further this year, given strong demand from China and India, Chanin said.

Banpu's average sales price may be lower than the BJI index since some of its coal is of lower quality with a high sulphur content, he said.

An expected rise in oil prices would increase Banpu's costs this year by up to 7 percent, he said, adding oil accounted for 25-30 percent of the company's costs.

Banpu, which quotes its coal prices in dollars, would book lower revenue this year when converting revenue into baht, which is trading around 33 to the dollar now versus 34-35 last year.

The company is expected to post a 2010 net profit of 13.7 billion baht, down 5 percent from 2009, according to Thomson Reuters StarMine's SmartEstimate, a consensus estimate that gives more weight to recent forecasts by top-rated analysts.

Its coal business accounts for almost 70 percent of earnings and the rest comes from its power business.

Banpu, which also has three coal mines in China, aimed to spend $96 million this year as part of planned investment of $466 million over the next six years, mainly to expand its coal and power businesses in Indonesia and China, Chanin said. ($1=33.13 Baht)

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