A tale of entrepreneurial courage

A tale of entrepreneurial courage

Straits Asia Resources’ Richard Ong always looks ahead to see what needs to be done in the present. TEH SHI NING reports

THE mining chapter of Richard Ong’s entrepreneurial story, begins with a helicopter ride to a small remote island east of South Kalimantan.

‘The first important principle is that good leadership needs to take care of people. You have to see to the interests of your subordinates, the public, subcontractors and all stakeholders too, because you need people to build up the company.’
- Mr Ong
Landing on Sebuku Island, which had no water or electricity supplies and a population of just 4,500 then, Mr Ong and his partner found at their disposal just two motorbikes with which to get around the island and survey its coal potential.

Despite dissenters who said that Sebuku’s coal would not be worth their while, Mr Ong and his partner were sufficiently convinced of its merits to procure the concession rights to conduct exploration and production of coal there. That decision has paid off nicely, as Sebuku Mine’s coal production now far exceeds what sceptics initially predicted.

But the Sebuku story is just part of a longer tale of entrepreneurial daring and excellence that has earned Mr Ong the title of Ernst & Young Entrepreneur of the Year (Natural Resources) this year. In fact, the chief executive and cofounder of Straits Asia Resources, the only pure coal mining company that is listed on the Singapore Exchange, did not start out in the mining sector.

Mr Ong began working in Indonesia in the 1970s, when the Singaporean marine engineering company he was working for headed there. That business, now called Indo Straits, remains within the Straits Asia group, providing support services to its two mines.

‘Because my education background was poor, I knew that if I want to gain success, I’d have to go abroad,’ Mr Ong said. Those initial years have been crucial in honing his business acumen. ‘Stationed out there, I had to look into how to get a business going, get to know people, network, learn everything from scratch,’ he says.

Despite being unable to speak the local language, Mr Ong proved capable enough to head the Jakarta office at the age of 28.

It was while working with Straits Engineers that Mr Ong struck coal at Sebuku Mine with his partners. They then sold a majority stake to Australian-based Straits Resources, which has prior mining experience and a clearer business focus on mining.

But he continued to be involved in setting up the infrastructure and production capabilities for the Sebuku mine, as it shipped coal to customers and undertook its own marketing. And the eventual idea to spin off Sebuku under a Singapore-listed entity - how Straits Asia Resources came to be - was also Mr Ong’s.

Noting that Indonesia is rich in resources, but remains weaker in other aspects, Mr Ong persuaded his fellow Straits Resources directors that Singapore’s credibility would make it a good place to list Straits Asia in 2006, and raised the capital necessary for growth.

‘To be an entrepreneur, I think it’s a good thing to be able to foresee what you have to do, and what you can do,’ he says.

It is a common refrain of his - looking ahead to see what needs to be done in the present. ‘When I took over the driver’s seat at Straits Asia, I realised that Sebuku is still relatively small and thought, if this is a listed company that I’m going to build, we should really do something more.’

The business network he has built over the years of working in Indonesia thus helped him connect with the family business which then owned a mine in Jembayan, and convince them to sell it to Straits Asia in 2007.

He chose the mine as it had production facilities that were already up and running, and a good team; it also had, on top of huge deposits, a strategic location and very saleable coal. Good integration post-acquisition, Mr Ong says, has enabled the company to raise production at the Jembayan mine to five million tonnes from four million tonnes.

This record production has raised sales volumes, and its pre-tax profit for 2008 has risen over 300 per cent to $261 million. With the Sebuku and Jembayan mines, Straits Asia today produces about 10 million tonnes of coal each year. ‘Of course, I’ll not stop there,’ Mr Ong says.

‘My plan is to build this company into one producing 20 million tonnes of coal by 2012. And beyond that, to build it up to 30 to 40 million tonnes to make it quite sizeable even on the world stage.’

Organic growth will be the prime means of reaching the first target, Mr Ong says. Both Sebuku and Jembayan mines hold significant potential to produce more than they currently do. He believes that the target of 20 million tonnes by 2012 is firmly within reach with teamwork and careful mine planning, as well as sheer grit, in certain cases.

The group recently managed to secure a mining area on Sebuku previously restricted by the Indonesian government, and is looking to acquire a third mine next to Jembayan.

But Mr Ong intends for Straits Asia to actively look for external acquisitions too, to diversify its geographical risks. A proposed de-merger from Straits Resources in 2008, cancelled due to the global credit crunch, had included the purchase of coal concessions in Brunei and Madagascar.

‘You cannot put all eggs in one basket, so we’ve got to expand. My goal eventually, is for Straits Asia to be an international mining company sitting here in Singapore.’

Mr Ong thinks that the coal industry’s growth prospects remain strong in the long-term, as clean-energy technology remains unfamiliar and expensive. ‘Coal is still the cheaper commodity for power generation.’

What gives Straits Asia an edge too, is the fact that the thermal coal produced by its Sebuku mine is of a higher quality than most. Coal from Sebuku can thus be sold to the Japanese market at a premium, which China, whose exports of its own coal deposits are balanced against imports to determine prices, is as yet not ready to pay.

Hence, while many businesses would clamour for a slice of the China pie, Mr Ong’s Straits Asia stands somewhat aloof. Instead, he sees India as the market which holds greater growth potential for Straits Asia, with demand there now hitting 100 million tonnes a year.

It is the Jembayan coal which India buys - the calorific value of coal produced there is not as high as Sebuku and thus more saleable to markets such as South Korea, Taiwan and Malaysia too.

The quality of the coal produced by Straits Asia’s mines means that he does not fear being faulted for environmental irresponsibility. In fact, the company commits considerable resources to fund research into better environmental management policy.

For instance, it has collaborated with universities and the Indonesian Department of Forestry on rehabilitation techniques in the post-mined Sebuku areas. Innovative approaches to swamp mining, where mud slides remain constant hazards, are also researched.

The growth of Straits Asia so far, and the experiences he shares, are underpinned by several basic principles, says Mr Ong.

‘The first important principle is that good leadership needs to take care of people. You have to see to the interests of your subordinates, the public, subcontractors and all stakeholders too, because you need people to build up the company.’

In the case of Sebuku island, the community itself has become a key stakeholder of Straits Asia. Mr Ong estimates that 40 per cent of the population there now works for the mine. The Straits Asia presence there has contributed to the island’s infrastructure development - roads and bridges, schools and hospitals have been built. Occupational safety and health of workers in the mines are also monitored by external audits, to ensure an environment of continuous improvement.

Good communication is key too, Mr Ong says. ‘For leaders, sometimes we are just busy making decisions, but you need other people to successfully implement them, so how to transmit your idea of where the business is going, and make sure everyone is headed in the same direction, that is very important too.’

He may have picked up a prestigious EOY award this year, but success to Mr Ong is not about him, because the company cannot be one in which he plays an indispensable role. ‘If, when you’re not around, the company comes to a standstill, that’s not success,’ said Mr Ong, who has bigger dreams yet.

Source : Business Times - 19 November 2009

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