Australian firm to start coal production at S. Kalimatan mine

Australian pharmaceutical firm trying to turn into miner EQiTX Limited (EQX) announced on Tuesday it would start coal production at a South Kalimantan mine in third quarter of 2008.

?EQX is currently carrying out a due diligence drilling program on the South Kalimantan permits. Early results from the drilling indicate that, as expected, contain a quantity of coal, but further drilling and analysis is required to delineate a coal resource within the permits,? it said.

According to the company, the mine, which covered 200 hectares of area, was once developed and mined.

The company has signed an "additional binding terms sheet" with PT Mega Coal Indomine, under which EQX will take a 51 percent interest in the net profit to be generated by PT Alam Duta Kalimantan from its concession in Kintap, South Kalimantan.

The release did not explain the relation between Mega Coal and Alam Duta. But earlier reports said Mega Coal has coal concessions in South Kalimantan and East Kalimantan.

EQX said its board has resolved to pay Mega Coal US$2.5 million for the 51 percent profit share on the condition that the joint venture (JV) between EQX and Mega Coal will bear the operational risks of the coal project. However, Mega Coal will refund the $2.5 million to EQX if the JV fails to achieve an average price of US$40 per ton in the first 12 months of operation.

The transaction is subject to a due diligence to satisfy the needs of EQX for a minimum 4 million tons of coat reserve at a strip ratio of less than 8:1 within the permit area and a minimum CV content of 5300 GAD (regardless of JORC classification). It is also subject the proper issue of exploitation license to PT Alam Duta Kalimantan. (denny)