BHP says Kalimantan coking coal project may start production in 2014

Australian resources giant BHP Billiton said it would spend billions of US dollars to develop its Maruwai Coal Project in Central and East Kalimantan.

Indra Diannanjaya, President Director of BHP?s coal mining units in Indonesia told a parliamentary hearing on Wednesday that the Company would spend between $500-1 billion until 2014 to bring the project to become onstream in 2014. He said that the investment would be needed to bring the project into first phase production which would be planned to reach 6 million tonnes per annum of thermal and coking coal.

Another $2-3 billion would be needed to ramp up capacity to 11 MTPA and would reach ultimate capacity of 40 MTPA in 15 years, Indra said.

BHP will use combination of small and big barges to transport the coal produce and would use train for the next phase.

Indra`said the Company is ready to build railway line of its own if it could not find third party to develop the railway.

BHP has 7 coal contract of work (CCoW) areas that form Maruwai Coal Project , all of which are in suspension mode due to order from the Ministry of Forestry. Indra said the Company has reached settlement with the Ministry and expected the suspension to be lifted later this year.

The project is located in the heart of Kalimantan island and is facing huge logistics problems as the distance to transshipment point is very far which made transportation costly. Infrastructure in the area is very poor, which will force the Company to develop its own.

The company is also facing regulation problems as some of the concession are located in protected forests where open pit mining is prohibited.

BHP is currently in the process of selling 25 percent stake in the project through tender and Indra said that thus far the Company has yet made any decision on the winner. (alex)