Indonesian coal companies are snapping up high-grade assets in Australia and North America, as better access to financing and less climate pressure at home give them an advantage over Western rivals.

Golden Energy and Resources, controlled by Indonesia’s Sinar Mas Group, last month completed its $1.65 billion acquisition of a majority stake in Illawarra Coal Holdings from Australian miner South32. This adds to the company’s assets of metallurgical coal, also known as coking coal, after it bought another Australian miner, Stanmore SMC, from BHP and Japanese trading house Mitsui in 2022. 

In July, Delta Dunia Makmur, one of Indonesia’s largest mining services contractors, announced the completion of its $122.4 million purchase of U.S. miner Atlantic Carbon Group. The deal gives Delta ownership of four anthracite coal mines in Pennsylvania, and marks the company’s expansion from mining services into mine ownership. 

It also reflects the company’s growing overseas footprint after it bought an Australian mining services company in 2021, which gave Delta access to coking coal mining technology after many years of focusing on thermal coal while serving big Indonesian clients.

“Controlling more of the value chain [by] being a mine owner gives us more opportunities to obtain higher margins,” Iwan Salim, a Delta director, told Nikkei Asia. 

Anthracite is considered the most valuable class of coal and, like metallurgical coal in general, is mostly used in steelmaking. Indonesia is the world’s largest exporter of coal, but its deposits are dominated by low-rank thermal coal, which is mainly used for electricity generation.

Salim said demand for anthracite remained high in the U.S. and Europe, as governments there allow its use in iron and steel production due to lower emissions.

He added Delta was considering more acquisitions, as the company aimed to generate 50% of its revenue from nonthermal coal businesses by 2028 — from an estimated 28% this year. “As long as there are sensible opportunities, we will take them,” Salim said.

Rating agency Moody’s noted in a May research report that business conditions are more difficult for North American coal miners than their Asia-Pacific counterparts, citing “a faster decline in domestic coal demand, greater regulatory risks and more limited external funding options” from international banks and the U.S. dollar bond market. 

These conditions appear to be making prime coal assets in some Western countries ripe for takeover by Indonesian companies, which still enjoy broad funding access from state-owned banks and domestic bond markets. This was demonstrated by Indonesia in 2023 becoming the first country to export more than 500 million tonnes, “demonstrating its unmatched flexibility to ramp up production and exports,” the International Energy Agency said in a July report.

“My friends bought mines in Canada cheaply,” Vincent Saputra, president director of coal mining services company RMK Energy, told Nikkei. He added that miners in the U.S., Australia and Canada were discarding their coal mines due to climate pressures, “so it’s an opportunity, a good time to acquire their assets.” 

He added, though, that RMK had no plans to buy offshore assets in the medium term. Similar to Delta, RMK recently expanded from mining services to mine ownership with its purchase of thermal coal mines in Jambi, on Indonesia’s Sumatra island. The company is planning to ship most of the mines’ output to China and India.

Saputra said over the long run the company was planning to diversify into nickel and other minerals businesses, but “coal will still be very much needed in the next 15-20 years.”

“Our focus now is to increase our reserves to make our cash flow stable, which will make it easier for us to transition,” he said.

Maisam Hasnain, vice president and senior analyst at Moody’s Ratings, said he regarded expansion overseas and into metallurgical coal by the Indonesian companies as part of a larger diversification push that bigger Indonesian coal players had also embarked on. Top miner Adaro Energy, for example, is building an aluminum smelter and Indika Energy has entered the electric vehicle business. 

Hasnain said the pursuit of diversification “better positions” coal companies to preserve long-term credit quality. “Amid the global drive to decarbonize, a failure to diversify could significantly weaken miners’ credit quality over the next 10 years.”

However, in the near term, diversification into non-coal businesses “will raise miners’ execution risk given their limited track record” in the other sectors, he added.