Darma Henwa and Fujian Haian Rubber Sign Strategic Tyre Management Agreement

Darma Henwa and Fujian Haian Rubber Sign Strategic Tyre Management Agreement

Jakarta, December 4, 2020 – As an effort to increase productivity of heavy equipment in its mining operations, PT Darma Henwa Tbk (DEWA) signed a 5 year Total Tyre Management (TTM) Agreement with the largest tyre manufacturer in China, Fujian Haian Rubber Co. Ltd. This agreement was signed by the Vice President Director of Darma Henwa, Mr. Prabhakaran Balasubramanian and the Director of Fujian Haian Rubber, Mr. Zhitang Chen, on 25 November 2020.


Under the TTM Agreement, Fujian Haian Rubber, through its subsidiary PT Luan Tyre Indonesia, will provide all the tyre needs for heavy equipment at Darma Henwa’s coal mining projects in Bengalon, East Kalimantan, Asam Asam and Satui-Senakin in South Kalimantan.  TTM will include procuring, fitting and maintenance of tyres, and regular training on optimal tyre use, wear and tear for Darma Henwa’s operators, and monitoring their operational efficiencies.


With tyres contributing to almost 30% of the maintenance costs, through this TTM, Fujian Haian will standardise unit tyre costs and reduce the cost burden on Darma Henwa. Tyre supply and maintenance from Fujian Haian will have a unique actual monthly operation-based payment mechanism of US$/BCM/KM.


This TTM arrangement will have several benefits for Darma Henwa. First is that it is of minimal risk, since the payment will be made reflecting the actual usage and distributed on a per BCM basis.  Second, this achieves a significant reduction in capital as well as operating costs with no inventory to maintain and an undivided focus on maximizing productivity.  Third, Fujian Haian Rubber will supervise daily operations hands on to make more suitable tyres specific for site conditions and strive for continuous improvement. There will be experienced professionals who are tasked with maintaining tyres to ensure safety and efficient productivity while being transparent on costs.  Finally, it ensures timely supply of tyre needs without lost time in operation and production.


"TTM is the key to managing tyre costs as part of our maintenance budget.  With this collaboration, we can now totally devote our focus on productivity. As a result, the Company's volumes will increase and ultimately contribute to the increase in revenue and profits, while effectively managing our costs.  We are indeed excited about teaming up with Fujian Haian Rubber in achieving our goal to be the most cost effective mining services provider in Indonesia" said Vice President Director and Chief Executive Officer of Darma Henwa, Mr. Prabhakaran Balasubramanian


Regarding the performance, until the end of October 2020, overburden removal at Bengalon coal mine was recorded at 66.55 million BCM, Asam Asam coal mine at 17.50 million BCM and the Satui coal mine at 11.37 million BCM. For coal production, Bengalon project recorded 7.68 million tonnes, Asam Asam project amounted to 5.95 million tonnes and Satui project at 0.6 million tonnes.