Churchill Mining signs coal off-take HoA with Indonesian power utility

London Stock Exchange AIM-listed mining firm Churchill Mining Plc said on Friday it has signed a Heads of Agreement (HOA) with Indonesian power utility company PT Ridlatama Bangun Mandiri (PT RBM) to supply thermal coal for 30 years to feed two 30 megawatt power stations that PT RBM is building in Kalimantan.

PT RBM is an independent power producer owned 55% by PT Indonesia Power (a wholly owned subsidiary of Indonesia?s state owned electricity utility, PLN) with the remainder owned by private investors. PT RBM was recently granted licence approval to build the power stations and construction will start at the beginning of 2008. The plants are expected to be on-stream by mid-2010.

These first-stage plants will be built at a cost of approximately US$60 million at Muara-Marah, a provincial town located approximately 15 kilometres east of Churchill?s East Kutai coal discovery.

Under the HOA, which will convert into a final coal-purchase agreement once a JORC compliant mining reserve of a minimum of 30 million tonnes has been defined, Churchill will supply approximately 840,000 tonnes of coal per annum for 30 years based upon a 5% discount to the prevailing market price.

Testwork on coal discovered by Churchill at its East Kutai project to date has found it to have an average calorific value of 5260 kilocalories per kilogram. Investigations made by Churchill show that similar type coals are trading for approximately US$28 per tonne.

Churchill Mining?s joint managing director, Paul Mazak, said the HOA was a major step forward in the Company?s plan to secure early-stage cash flow. ?We are viewing the relationship with PT Ridlatama Bangun Mandari as a first step. We are aware that they are looking to building other power stations in Kalimantan, certainly much bigger than these first two plants, and discussions are ongoing on how Churchill can be involved.?

Churchill has right to two coal mining concession in East Kalimantan, namely East Kutai project with 75 percent interest and Sendawar project. (alex)