Geo Energy completes acquisition of S. Kalimantan coal mines

By Romel S. Gurky

SGX-listed Geo Energy Resources Limited, an Indonesian coal mining specialist, announced Monday that it has completed the targeted acquisition of approximately 66 percent of Borneo International Resources Pte Ltd (BIR) for US$55 million.

BIR, through its Indonesian?s subsidiary PT Sungai Danau Jaya (SDJ), owns two coal concessions in Tanah Bumbu Regency, South Kalimantan, with a combined area of 236.1 hectares, and contain coal with an average calorific value of 4,038 kcal/kg (GAR).

Geo Energy said in a statement that the coal CV at SDJ?s mines is higher than the CV of the group?s current BEK concession, which contains coal with an average calorific value of 3,470 kcal/kg (GAR).

?The acquisition will also increase the Group?s coal reserve bank from approximately 11 million tons to more than 40 million tons,? Geo Energy said.

The indirect acquisition of SDJ forms part of the Geo Energy?s overall strategy to (i) shift its focus to include coal with calorific value ranging from 4,000 to 4,200 kcal/kg (GAR) as such coal are highly versatile as it meets the requirements of power plants in India, China and Indonesia; (ii) expand the group?s range of production, Geo Energy said in the statement.

Commenting on the completion of the acquisition, Charles Antonny Melati, Executive Chairman of Geo Energy said, ?With coal prices still relatively weak, we believe that this is an opportune time to push through the completion of the acquisition and increase our coal reserve bank. We believe that this concession offers good long term value and will not only allow the Group to possess a steady bank of coal deposits to monetize in the years to come, it also allows the Group to expand its footprint into South Kalimantan.?

In addition to the newly acquired concession, Geo Energy also recently announced that it had entered into another mining services contracts and mining cooperation agreement with CV. Mandiri Makmur Citra Tambang (MMCT) in July 2014. Under the terms of the agreement, the Geo Energy will provide mining services, comprising overburden removal, including land clearing and dewatering in the concession also located in South Kalimantan, spanning a total area of 190.7 hectares. Geo Energy will also purchase the coal from the concession owner at US$35.35 per ton, and has contracted for 1.9 million tons of coal with a calorific value of 4,100 kcal/kg (GAR).

Both the acquisition and the new mining services and offtake agreement will allow the Geo Energy to increase its presence and strengthen its foothold in South Kalimantan. ?The Group is expected to benefit from the simple logistics and short distance between each concession and the Java Ocean of approximately 20km or less. The close proximity of MMCT and SDJ to one another will also provide synergies and economies of scale operationally,? it said.

Geo Energy said it will continue to look out for business expansion opportunities, which may include acquisitions, joint ventures and/or strategic alliances to expand its business operations and increase its coal production levels.

Editing by Reiner Simanjuntak