Cokal sees lower investment for BBM coking coal project

By Romel S. Gurky

ASX-listed Cokal Limited said on Wednesday that the recently completed update of the definitive feasibility study (DFS) conducted by consultant PT Resindo Resources indicates significant reduction in capital and operating costs for the PT Bumi Barito Minerals (BBM) coking coal project in Central Kalimantan.

The company said in a statement that together with the recent increase in coking coal pricing and its proximity to the growing Asian markets, BBM has become an attractive investment opportunity.

?The DFS update has continued to show that the BBM coal mine and associated transport system can be developed as a low capital cost operation with moderate to medium range operating cost,? the statement said.

The company said the DFS update maintained the development as a 2 million tons per annum (mtpa) open cut mining operation over 10 years. BBM?s relatively low ash, low volatile, low sulphur, low phosphorus coking coal would command a high value as a blending feed in the premium coking coal market.

Cokal said the total estimated development capital required for the BBM project to deliver a production rate of 2 mtpa product, including developing a coal handling preparation plant (CHPP), a haulage road and all necessary and site transport is now estimated at US$68 million, 10.3 percent lower than the base DFS of $75 million.

This assumes that mining, barging and hauling equipment will be provided by the respective contractors. These equipment cost are therefore included in the operating costs and do not form part of the capital estimate.

The already low cash operating costs (excluding royalties of 7%) unit rates have fallen 15.5 percent to:
-Year 1 average $58/ton (Base DFS:$65/ton)
- First 5 years average $70/ton (Base DFS:$82/ton)
- Life of mine average $82/ton (Base DFS:$97/ton)

The production and investment profiles are phased for:
- Initial start-up capital $47 million (Base DFS:$50m)
- After start up: Enhancement capital $21m (Base DFS:$25m)
- Expand blending operations at the Intermediate port of Kelanis
- Increase coal handling capability for the higher ash pits.

Cokal said that initial construction is expected to take approximately 12 months, with the first production from BBM scheduled for the first quarter after the construction is completed.

Cokal said BBM?s Production IUP covers an area of 14,980 hectares (ha), and has received all the necessary regulatory approvals including Forestry Department; the IPPKH (Forestry Permit) which allows for the construction and operation of the port, haul road and initial mine development areas for Cokal?s initial mine plan of 2 mtpa of premium coking coal from BBM.

The BBM IUP straddles the Barito River and has numerous outcrops of bright coal. Coal core samples analysis confirmed BBM?s coal to be a premium coking coal with Crucible Swell Numbers (CSN) values generally 9 or more.
- Total Coal Resource estimate of 266.6 million tons at BBM, comprised of 19.5 mt measured, 23.1 mt indicated and 224 mt inferred resources is reported in accordance with the 2012 JORC Code
- Product split for the total BBM Coal Resource is estimated to be 90 percent coking coal and 10 percent PCI v- Product split used in the DFS (approx. 20mt) was approximately 82 percent coking coal and 18 percent PCI
- a life of mine strip ratio of around 18:1 and recovery rate of approximately 93.5 percent, delivering 2mtpa product.

Editing by Reiner Simanjuntak