Churchill Mining Plc: East Kalimantan Coal Project
Monday, March 29 2010 - 04:43 PM WIB
I am pleased to present Churchill Mining Plc's Half Year Report for the six months ended 31 December 2009 as development of our world-class East Kutai Coal Project ("EKCP") in Indonesia continues to gather momentum. The six months have seen us make a number of key steps forward in terms of progressing EKCP and creating value for our shareholders, most notably through the delivery of a mining reserve of nearly one billion tonnes, with potential to expand this further.
EKCP is a world-class opportunity and since acquiring a 75% interest in the project in 2007, we have been actively defining a large-scale sub-bituminous thermal coal resource which we believe will be extremely attractive to end-users of thermal coal, particularly in India and China.
Key achievements during the reporting period included the definition of the Company's maiden in-situ mining Reserve of just under one billion tonnes of thermal coal and significant work completed on a Feasibility Study into the development of what we expect will be a large-scale and profitable coal mining operation in one of the world's key emerging coal provinces.
The re-classification of a large portion of our resource base has been a high priority for the Company and to this end, in-fill drilling and data analysis underpinned an upgrade of 1.33 billion tonnes of the previously defined 3.18 billion tonnes global coal resource in August 2009 into the JORC categories of Measured and Indicated.
A JORC Reserve Report was subsequently completed in October 2009 by independent coal geology and mining specialists, SMG Consultants, resulting in the definition of an initial JORC probable In-situ Reserve of 956 million tonnes of thermal coal. This was a significant achievement for the Company, as we look to leverage off the strong platform we have built through increasing confidence in the resource base at EKCP, providing us with a strengthened position from which to assess and negotiate strategic opportunities
In addition to this, work continued on the Feasibility Study on EKCP which has identified the potential to exploit the project's thermal coal reserves at an estimated annual production rate of 20 million tonnes per annum.
Initial results from the EKCP Feasibility Study have been very encouraging and we look forward to announcing the associated results of our economic modeling. We expect to complete the feasibility review process in the second quarter of 2010 at which time the Company will make a detailed assessment on project economics and development requirements.
In the meantime, we will continue to create value by advancing the project and putting the project's infrastructure items (mine stockyard, overland conveyor, port/shiploader and power station) out to tender. To date, the bids received have been well under predicted costs due to the resurgence in global manufacturing and engineering capabilities following the global financial crisis.
Churchill is still evaluating how best to generate value for Shareholders. Our options include the sale of the project or Company, the development of EKCP with a joint venture partner, or the financing and implementation of the EKCP by Churchill itself. The project construction work at EKCP is expected to take approximately two years to complete. With this timeframe in mind, we have commenced the application process for necessary licences and permits with the relevant Central, Provincial and Regional Indonesian Governments and will be working diligently with these agencies to ensure that approvals are progressed as rapidly as possible.
We have also completed work on the optimisation of pit shapes and the mining sequence. Furthermore there is work in progress on evaluating a transport corridor route and the site for a port terminal, with further site test work, including a trial pit, currently in the pipeline.
Churchill continues to assess marketing and off-take possibilities for EKCP coal, with Company representatives recently visiting 17 companies on India's East Coast to discuss the project and potential off-take agreements. This trip was very successful with Churchill representatives highly encouraged by the growth profile of future Indian coal demand. It was established, during the trip, that India will need a minimum of 100 million tonnes per annum of new EKCP-styled coal to meet expected future energy needs, highlighting the growing demand for coal in the region.
At our Sendawar Coal Bed Methane Project in East Kalimantan, we continue to evaluate development options including Joint Venture discussions with a number of interested parties. While the development of the EKCP is our key focus of attention, we will continue to assess options to add value and diversification to Churchill through Sendawar.
In a strategic move to complement the Company's fast track development and production strategy, Churchill announced the appointment of Pala Investments AG as a strategic advisor in December 2009. Pala has been mandated with the task of increasing Churchill's operational and capital-raising flexibility, and we are confident that its team of professional mining and financial experts will be able to play a key role in obtaining the necessary funding for the future work program and unlocking shareholder value as we move into the development phase.(end of excerpt)