Despite the challenging short-term coal outlook, BHP Billiton is optimistic about both thermal coal and metallurgical coal in the medium to long term. As a result it is planning to start its next Indonesian coal mine within two years.

This year BHP started mining at the Haju project in Central Kalimantan, which is the first deposit mined in the IndoMet project, a joint venture 75% owned by BHP and 25% by Adaro Energy.

BHP’s Indonesian coal boss Mark Small said during the Ozmine forum in Jakarta that IndoMet would seek create a world-class metallurgical coal basin supporting a suite of mines and employing many thousands of people.

He said the company had commenced construction within a second CCoW (Coal Contract of Work) due to come on-stream in 2017. “To date we have identified a resource of 1.3 billion tonnes with further exploration planned.”

Regarding the outlook, he said: “We are potentially more bullish about metallurgical coal. In the long term I think there will be a recovery, to what extent I am not sure.”

He said there was an opportunity in Indonesia to “consolidate, get the cost base right and establish a sustainable business going forward.”

The mining giant’s strategy is to mine only the largest mineral resources which can be expanded for generations and rarely enters a new mining province without evidence of a substantial resource.

Mark Small said BHP had undergone a simplification process in terms of identifying its key assets. The demerger with South32 had enabled it to focus on four key resources of coal, iron ore, petroleum and copper. “Across the business we are focusing on safe productivity whilst driving costs down.”

One of the benefits of Indonesia was that it had a relatively low wage structure but there were also potential improvements in productivity factors, he said. “I think we will continue to see costs come down.”

The IndoMet project has a target of employing 70% of its staff from the local community in Kalimantan. “We are in recruiting now ... we are ramping up to 1200 people (and) are absolutely committed to supporting local communities wherever possible,” Mark Small said.