Indonesian Journal of Environmental Management and Sustainability p-ISSN: 2598-6260 e-ISSN: 2598-6279 http://ijoems.com/index.php/ijems Research Article Received: 26 November 2017 Accepted:24 March 2018 *Corresponding author email:riam_amsya@yahoo.com DOI: 10.26554/ijems 2018.2.15-1915 Investment Estimation and Acceptance of State Tax Instead of Coal Mining Business License Clear and Clean in West Sumatera Province Riam Marlina A 1, Fachrurrozie Sjarkowi1, Maulana Yusuf 2 1 Postgraduated of Mining Engineering, Sriwijaya University, South Sumatera, Indonesia 2 Associate Professor/Head of Mining Engineering Departement, Sriwijaya University, Indonesia ABSTRACT This research conceptual measurement simulation for financial component which is needed for investment and benefit simu- lation held by stated that taken from company obligation categorized as non-tax for mining activities predicated with clear and clean at West Sumatera Province. This simulation connected with capital investment and operational activities that influenced by coal getting stripping ratio, coal hauling and other financial related. This simulation only values stated income non tax and roy- alty. Analysis methods using from several document feasibility study from Coal Company has already operated, and also esti- mation for all investment component and components of income stated non tax. Accuracy data accepted for this research at least 30% from all investment. Estimation starting from deciding production target, life mining period, investment needs financial op- eration and other financial activities, and comparison with theoretical measurement. The comparison result then used to make an- other financial model simulation. At the last, this research will present economy simulation model created from mining operation- al activities in west Sumatra province to estimate stated income non tax from mining production operational. Using sensitivity analysis, shows that the change of coal selling prices will gives significant influence to NPV project and stated income non tax. Keywords: estimation, investment, non tax, clear and clean, simulation, 1. INTRODUCTION This research do conceptually calculation the costs required for investment as well as the calculation of the profit obtained from the obligation of the State of the company in the form of the ac- ceptance of the State is not against tax clear and clean coal mining in West Sumatera. The simulation is associated with the magni- tude of the investment costs and operation of which depends on the selling price of coal, stripping ratio and transport distances, as well as other costs. Simulation of the acceptance of the country's only counting admissions state tax instead of a fixed royalty dues and dues. This research was limited against the special status of coal mining licences clear and clean in the Province of West Su- matera. The purpose of this research is create a conceptual model of investment estimation and a conceptual model of the country in- stead of taxes from IUP clear and clean coal in West Sumatera. 2. EXPERIMENTAL SECTION This research uses descriptive comparative method. Type of data used as analysis research is secondary data. The secondary data were used, among others: 2.1 The Investment The estimated cost of the investment or capital cost is calculated by estimation the production capacity of coal per day or per year and life of mine. This estimation process according to Wijaya [1] based on a formula of Tylor [2] or known as Tylor's Rules that have been proven by Mc Spadden & Schaap [3] and Camm [4]. The formula is as follows: Production Capacity = [Coal Reserve]0.75Γ·70 (1) Life of mine = 0.2 x √Coal Reserve4 (2) The investment costs can be calculated using the formula re- sults O'Hara & Suboleski [5] which has been verified by Shafiee, Nehring and Topal [6] used are as follows: Cost of investment (US $)=$400.000 x (coal of mine) 0.6 (3) Stebbins and Leinart [7] in Wijaya stating the above formula based on several components that stand out among other invest- ments in exploration, production, job before working capital, pur- chase of mining equipment and processing, development costs, infrastructure costs, engineering and construction management, building and property purchases, and other costs (contingency). Author, year | Indones. J. Env. Man. Sus. 1 (1) 2017: xx - xx DOI: 10.26554/ijems.2018.2.15-1916 2.2 Costs Operation Operating costs are the costs incurred to produce or digging coal, to connections to the port. This cost component reference using data from the Directorate General of Mineral and Coal Decision No.579.K/32/RTG/2015, about the cost of production for the de- termination of the price of coal to the year 2015. In the Appen- dix mentioned, that production costs are assigned based on the type of costs which consist of direct production costs, production costs, and indirect costs General and administrative. Some of the costs incurred in the period before the operation of the production, especially in component costs, necessitating in- vestment in map out to the present (2017). To do that, the projec- tion used Marshall & Swift Mining and Milling Equipment Cost Index. The index used to compare between price/cost of a given year (past), with the price/cost of the current year or in the future, so as to provide an overview of the costs that will be incurred. The above charges will be multiplied by a factor of escalation Index Marshall & Swift until the age of the project, except for the cost of Amortization, Liberation/ replacement land and depreci- ation, Fixed Dues and Assuming the cost of production/Royalty. The equation used to calculate the cost at this time are as follows: 𝐢𝐢𝑑𝑑 = 𝐢𝐢𝑂𝑂 Γ— ( 𝐼𝐼𝑑𝑑 𝐼𝐼𝑂𝑂 ) (4) Description; CT = Cost Estimation when this year or will come CO = cost in the previous year It = Index Marshall & Swift this year or will come IO = Index Marshall Swift & previous year 2.3 Price Projections Price predictions made in reference to Australia with the ther- mal coal market equality calorie coal (gross water received) 6.322 kcal/kg GAR or 6.800 kcal/kg of ADB (air dried base), moisture content (total moisture) 8%, 0.8% sulfur levels AR (as received), and ash content 15% of the reference AR, then in the calculation of the price of coal in West Sumatera is adapted to the coal quality. The formula used to calculate the price of coal from West Sumatera with coal quality thermal reference equality, is the formula benchmark price of coal and Mineral Resources by the Ministry, the Marker with the following formula: The price of coal = (HBA*K(i)*A(i))-(B(i)-U(i))(5) description; HBA = Coal price reference-thermal coal marker (GAR) K (i) = Heat value coal (i)/6322 kcal/kg A (i) = (100 – Coal Water Content (i))/ (100 – 8/FKA (i) FKA (i) = {[(100 – 8)/(100 – Coal Water Content (i))] * the moisture contentof coal (i)} + (100 – 8)/100 B (i) = (Sulfur content of Coal (i) – 0.8) * 3 U (i) = (Ash content of Coal (i) – 15) * 0.3 I = Price Marker 3. RESULTS AND DISCUSSION 3.1 Results The results of the processing of data regarding the cost of invest- ment and the empirical formula yield data field as follows: a. Production Target Based on Figure 1 above can be shown that the bigger the re- serves, then followed with an increase of annual production ca- pacity. mpirical formulas resulting from the approach to coal re- serves with an annual production target, are as follows; Y = 0,169x0,526 (6) Y is the ideal production goals with in one year (million tons) and X is mining coal reserves in a region or a concession (million tons). To predict life of mine of the graph of Figure 2 obtained empirical formula as follows: Y = 3,095e0,244x (7) Y is the ideal life of mine in years, and X is a variable of the coal reserves of the mine in a million tons in a licenses. b. Total cost of Investment The total investment cost estimation calculations carried out using emperis equation is obtained from the processing of the data. Match with the magnitude of the total cost of the affected - 0.10 0.20 0.30 0.40 0.50 0.60 0.70 - 2.00 4.00 6.00 8.00 10.00 12.00 14.00 Pr od uc tio n (x 1 m ill io n/ ye ar ) Reserves (x1 million ton) Production by Formula Production by FS Production Approach Power (Production Approach) Figure 1 Formula of production Approach 0 2 4 6 8 10 12 14 16 0,25 0,32 0,63 2,40 12,15 lif e of m in e (y ea r) Reserves (x1 million ton) Life of mine actual life of mine by formula Figure 2 Formula approach to life of mine Author, year | Indones. J. Env. Man. Sus. 1 (1) 2017: xx - xx DOI: 10.26554/ijems.2018.2.15-1917 investment against inflation, then used Marshall & Swift Mine and Mill Equipment Cost Index. Data documents the feasibility study regarding the magnitude of calculation of the cost of the investment at the time of the fea- sibility study carried out attempted on Table 2. The total cost of the investment is obtained is then projected by using equation (4). The results of these calculations are compared with calcula- tions based on the magnitude of the investment needs of produc- tion using equation (3). Some of the data has a larger deviation than Β± 30%, since the year is compared when making feasibility study to the needs of the investment of the year 2017. So with the results of the projection needs investment and the formulation of theoretical approach, empirical formula obtained to predict total investment needs in West Sumatera. The formula is as follows; Y = 3,163ln(x)+13,26 (8) Y is the total needs of the investment in units of million – dollar (million $) and X is a variable target annual production in mil- lion tons. The graph of the results of the calculation produces the equation 8 can be seen in Figure 3. c. Price Projection The projection of the price of coal was obtained from World Bank Australian Coal Price Forecast or the World Bank Institute (2017) for thermal coal prices Australia the period 2014 – 2030 pub- lished in March 2017. The following is the graph of the results of the regressions coal prices and coal in West Sumatera with a wide range of quality until the year 2037. d. Production Scheduling Estimated annual production target and life of mine is based on the assumption of reserve mining variations. The results gener- ated from production scheduling. The simulation is made on an annual basis for each of the goals and appropriate life of mine. Following is Figure 5 Simulating production and life of mine. e. Feasibility Assessment Financial models company located on the cash flow simulation. Summary the analysis of feasibility of investment coal mining in West Sumatera that outlines the company's skill level in gener- ating cash flow during the life of mine shown in Table 4 below. The eligibility calculation in the Table 4 below using a 10% of discount factors, these values using the method of approach to the weighted cost of capital or average weight average cost of capital (WACC). These methods are used because in the simulation cal- culation of cash flow, capital investment is part of the loan. f. Estimation Tax Not Country Acceptance Acceptance of State tax is not retrieved from the summation of results between fixed dues receipt estimation with estimated re- ceipts royalty dues in one year. Acceptance of State instead of tax- es that are derived from the coal mining business license clear and clean which was in West Sumatera Province, with of 158.43 mil- lion tons. The formula approach resulting from a fixed dues and royalty dues, are as follows: Y = 4x (8) Y = 17215x + 58259 (9) Y is the total acceptance of the State tax is not in units of $/year, and X is the variable price of coal. Discussion West Sumatera has the potential geology and the large coal re- serves, as well as scattered in 5 (five) District/City, which can be developed by the prospective investors. The potential of the most high ranking coal quality (high calorie) with the range of 6300 – 7121 kcal/kg ADB (air dried base). With coal price projec- tion of Sumbar Coal 1 (6125 kcal/kg) = 63.27 US $/Ton, Sumbar Coal 2 (6400 kcal/kg) = 64.87 US $/Ton, Sumbar Coal 3 (6600 kcal/kg) = 67.78 US$/Ton, Sumbar Coal 4 (6750 kcal/kg) = 69.36 US $/Ton, Sumbar Coal 5 (7121 kcal/kg) = 72.10 US US$/ 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 0.00 0.20 0.40 0.60 0.80 In ve st m en t (x 1 m ill io ns $ ) Production of the year (x1 million ton) Investment by FS Investment by teoritical Investment by emperis Figure 3 Results Total investment Approach 40.00 45.00 50.00 55.00 60.00 65.00 70.00 75.00 80.00 85.00 2010 2020 2030 2040 Pr ic e ($ /T on ) Year CV 6800 kcal/kg ADB CV 6125 kcal/lg ADB CV 6400 kcal/kg ADB CV 6600 kcal/kg ADB CV 6750 kcal/kg ADB CV 7121 kcal/kg ADB Figure 4 Projection Coal Price of WestSumatera 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.00 5.00 10.00 15.00 0 10 20 30 40 50 60 70 Pr od uc tio n (m ill io n to n/ ye ar ) Reserve (Million Ton) lif e of m in e (y ea r) life of mine Production Figure 5 Simulation Production and Life of Mine Author, year | Indones. J. Env. Man. Sus. 1 (1) 2017: xx - xx DOI: 10.26554/ijems.2018.2.15-1918 Ton. With the FOB barge or FOT barge varies. Sawahlunto to alternate FOT-Barge to PLTU Sijantang 4.5 km distance, when alternative FOB-barge to port of Teluk Bayur with distance of 125 km. South Pesisir Regency when FOT-Barge to port Patapa- han Painan with distance 25 km counts when FOT-Barge to the port of Teluk Bayur then distance of 125 km. Where as for Si- junjung, Dharmasraya Regency and City 50 FOT-Barge to the port of Teluk Bayur with a distance of 135 km, 150 km and 165 km away. Estimation of the acceptance of the country instead of taxes is the result of addition of predictions dues remain with the predic- tions of the royalty dues. Prediction model of estimation of dues still use formula formula to calculate and 8 prediction formula us- ing royalty dues 9. Table 4 Summary of the assessment of the feasibility of the various models of investment coal mining in West Sumatera Description Variable Unit Stripping Ratio Distance Sumbar Sumbar Sumbar Sumbar Sumbar Coal 1 Coal 2 Coal 3 Coal 4 Coal 5 Quality of Coal kcal/kg 6125 6400 6600 6750 7121 Price Projection US$/ton 63,27 64,87 67,78 69,36 72,10 Sawahlunto FOB Barge 4,5 Km 11 11 11 12 13 125 Km 7 7 7 9 9 DCF-(NPV i = 10%) 4,5 Km $27.52 $27.37 $27.37 $22.03 $19.77 IRR 12% 12% 12% 11% 11% PP 9,53 9,54 9,54 8,49 10,42 ARR 21,41% 21,38% 21,38% 20,19% 19,69% BC Ratio 1,22 1,22 1,22 1,21 1,21 DCF-(NPV i = 10%) 125 Km $44.33 $44.18 $44.18 $38.83 $36.58 IRR 15% 15% 15% 14% 13% PP 8,03 8,04 8,04 8,49 8,70 ARR 25,33% 25,30% 25,30% 24,10% 23,60% BC Ratio 1,25 1,25 1,25 1,24 1,24 South Pesisir FOB Barge 25 Km 10 10 10 11 12 125 Km 7 7 7 9 9 DCF-(NPV i = 10%) 25 Km $44.88 $44.73 $44.73 $39.39 $37.13 IRR 15% 15% 15% 14% 14% PP 7,98 7,99 7,99 8,45 8,65 ARR 25,46% 25,43% 25,43% 24,23% 23,73% BC Ratio 1,25 1,25 1,25 1,24 1,24 DCF-(NPV i = 10%) 125 Km $44.33 $44.18 $44.18 $38.83 $36.58 IRR 15% 15% 15% 14% 13% PP 8,03 8,04 8,04 8,49 8,70 ARR 25,33% 25,30% 25,30% 24,10% 23,60% BC Ratio 1,25 1,25 1,25 1,24 1,24 Sijunjung, Dharmasraya, 50 Kota FOB Barge 135 Km 7 7 7 9 9 150 Km 7 7 7 8 9 165 Km 6 6 6 8 8 DCF-(NPV i = 10%) 135 Km $46.43 $46.33 $46.33 $42.51 $40.78 IRR 15% 15% 15% 14% 14% PP 7,80 7,80 7,80 8,12 8,26 ARR 25,66% 25,64% 25,64% 24,79% 24,40% BC Ratio 1,25 1,25 1,25 1,25 1,24 DCF-(NPV i = 10%) 150 Km $25.93 $25.83 $25.83 $22.01 $20.28 IRR 12% 12% 12% 11% 11% PP 9,62 9,63 9,63 10,07 10,28 ARR 20,89% 20,86% 20,86% 20,01% 19,63% BC Ratio 1,22 1,22 1,22 1,21 1,21 DCF-(NPV i = 10%) 165 Km $50.81 $50.70 $50.70 $46.88 $45.16 IRR 16% 16% 16% 15% 15% PP 7,48 7,49 7,49 7,78 7,92 ARR 26,68% 26,66% 26,66% 25,81% 25,42% BC Ratio 1,26 1,26 1,26 1,25 1,25 Author, year | Indones. J. Env. Man. Sus. 1 (1) 2017: xx - xx DOI: 10.26554/ijems.2018.2.15-1919 CONCLUSION Results from simulation conceptually retrieved early picture, that business investment mining in West Sumatera deserves to be de- veloped on the condition and specific scenarios. Factors affecting the investment estimation and acceptance of State tax is not the ups and downs of the price of coal, the initial investment cost of the her little big, and operational costs. Changes to the compo- nents of the selling price of coal has significant effects against the rate of return or Net Present Value (NPV) of the project. REFERENCES [1] Wijaya, E.Conceptual study of Economic Valuation of invest- ments and projects of coal mine in South Sumatra. Thesis. Sriwijaya University. 2015. [2] Tylor, H.K. Mine Valuation and Feasibility Studies, Mineral Industry Cost. Northwest Mining Association, Washington, pp18. 1977. [3] Mc Spadden, G. & Schaap, W. Technical Note: Tylor’s of Mine Life. Proc Australasia Inst. Min. Metal, pp. 217-220. 1984. [4] Camm, T.W. Simplified Cost Model for Prefeasibility Mineral Evaluation. U.S. Bureau of Mines, Spokane-Washington, pp. 35. 2008. [5] O’Hara T.A & Suboleski S.C. Costs and Cost Estimation in Hartman, H.L (ed.) SME Mining Engineering Handbook 2nd Edition. SME Inc.: New York, Vol. 1, pp 2394 . 1992. [6] Shafiee, S., Nehring, M., Topal, 2009. Estimating Average Total Cost of Open Pit Coal Mines in Australia. Australian Mining Technology Conference. [7] Stebbins, S.A, Leinart, J.B. Cost Estimating for Surface Mines in Darling, P. (ed.) SME Mining Engineering Handbook third edition. SME Inc.: California, pp 1832. 2011.