By Christopher Thompson and Anthony Deutsch
On an overcast morning last December at the Four Seasons Jakarta, nearly two-dozen dignitaries arrived at the outlying steel gates. Security agents, armed with M-16 rifles, moved diligently along the sides of the assembled cars checking for explosives via a curved mirror. Waved on, the visitors ascended the driveway then walked to a basement room. The setting chosen to announce one of Indonesia’s biggest ever resource deals resembled a home counties conference centre: sliding walls, beige patterned carpet and a prefabricated bouquet of roses sitting on a makeshift desk next to the projector. Only the air conditioner whirring overhead, battling 34°C heat outside, gave a clue as to the tropical location.
FT book reviews – Oct-22.What we can learn from a nuclear reactor – Jan-14.Russia’s last writer – Jan-14.The new power of the press – Jan-07.Britain: what lies ahead? – Jan-09.Being Marco – Dec-17..Like his surroundings, the blue-suited speaker – who described his family business as “banking and wine” – kept a low profile, gliding in without greeting, the only indication of his presence a discreet sign in the lobby directing invitees to the Vallar presentation. The journalists – clustered around white-clothed tables, their chairs draped with creme-coloured organza in what resembled wedding preparations – took out pens and notebooks. Nathaniel Rothschild, 39, and the future Baron Rothschild, laid out his plans to create one of the world’s biggest coal producers from Vallar, a £707m “cash-shell” he had founded six months earlier. In so doing, he hopes to make his mark on the considerable family name.
Twenty-four hours later, Rothschild stepped off his jet to inspect Kaltim Prima Coal (KPC), the world’s largest thermal coal-producing mine. Accompanying him were the FT, his closest adviser and a recent friend: a fund manager with a metal ear stud and an Elvis-style quiff. “We met at a party in Wiltshire,” he said by way of explanation. The present environs could not have been less temperate. Sweating on a remote jungle airstrip on the island of Borneo, Rothschild cut an unlikely figure. Dressed in a monogrammed shirt and suede shoes he made a beeline for the air-conditioned welcome room. It was the closest Rothschild had been to any of the assets for which he had paid $3bn four weeks earlier.
Sitting down to a buffet lunch, which he didn’t touch, he explained why. “Coal mines all look the same, they’re just bigger or smaller.”
In the Rothschild case, they’re definitely bigger. Kalimantan, the mining region located on the Indonesian part of Borneo, is central to a new Great Game for Asia’s energy resources. Abundant coal deposits – formed when rotting plants were pressed into long, hard seams 20 million years ago – have made it ground zero of the global coal industry.
As a result, the island’s topography has been transformed. Entire hillsides have been razed and new valleys dug to expose giant crevices of black carbon. In turn, new forest has sprung from the earth dumped nearby, much of it adjoining craterous blue-green lakes formed from collected rainwater. In some cases the fissures in the earth are so vast that the rising water vapour coalesces above them to form clouds. From Rothschild’s helicopter, trucks can be seen carrying 330 tonnes of coal each, scurrying up and down like beetles, ferrying their load to steaming knolls where colossal steel probosci scoop and deposit it on to a conveyor belt. From there it is taken to the end of a pier extending 2km out to sea where half-a-dozen ships bearing Korean and Hindi lettering wait to deliver the fuel to East Asia’s insatiable furnaces.
In the process the island has become rich, if at the cost of widespread deforestation. From the air, you can spot brown-black earth foundations being dug by the island’s local nouveaux riches to support their California-style condos.
The KPC mine is, according to the manager, the “biggest earthmoving operation in the world”, shifting a billion tonnes of dirt each year. It also forms the basis of Rothschild’s plans to create a new “international coal champion”. The new company hopes to produce 140m tonnes by 2014, which would make it the world’s largest producer of thermal coal. The plan is to list it on the FTSE 100 by this summer.
“We have global aluminium companies, global gold companies but no international coal champion. It makes sense to consolidate the coal industry,” said Rothschild.
Published: January 14 2011 17:06 | Last updated: January 14 2011 17:06