Geo Energy secures life of mine coal purchase agreement
Tuesday, July 5 2016 - 04:29 AM WIB
SGX-listed Geo Energy Resources Limited, an integrated Indonesian coal mining group, said Tuesday that the group has entered into a long term life of mine (LOM) coal purchase agreement (coal offtake agreement) with ECTP Singapore to supply 4,200 GAR thermal coal for exports (excluding domestic sales) over the entire lifespan of PT Sungai Danau Jaya (SDJ) coal mine in Tanah Bumbu Regency, South Kalimantan.
The company said in a statement that the coal offtake agreement with ECTP Singapore is to supply 4 million tons of coal for a period of 7 months due in January 2017 and an additional 6 million tons of coal for a period until December 2017 and a minimum 4 million tons of coal per year for the remainder period of the LOM. The agreement follows an earlier offtake agreement that the group had with ECTP for delivery of 23 shipments or equivalent of 1.5 million tons of coal, which was completed in June 2016.
The group acquired a 66 percent stake in SDJ in August 2014 and the remaining 34 percent interest in December 2015 and commenced coal production at SDJ coal mine in December 2015. The first shipment of 55,000 tons of coal from SDJ was delivered in January 2016. Following which, the group has further delivered 485,000 tons of coal by the end of March 2016. By June 2016, the group has completed 23 shipments of coal to ECTP Singapore.
As previously announced, the group targets a production of 6,000,000 tons of coal in 2016 with expected monthly production to increase to more than 500,000 tons of coal per month.
ECTP (formerly known as BTG Pactual Commodities) was established in 2013 and has since developed into a global commodity merchant, with a presence in all the major global commodities hubs. ECTP is a global diversified merchant and client solutions provider in the commodities space covering a range of agricultural, industrial, and energy products.
Commenting on the outlook of the group, Tung Kum Hon, Chief Executive Officer of Geo Energy said, ?The coal offtake agreement over the LOM in the next 5 years or so is worth an estimated US$1.2 billion at current coal prices. More importantly, the prepayment of US$20 million on the coal offtake agreement for the further development of the SDJ coal mine and US$4 per ton advance on future coal supply of coal will strengthen the group?s cash flow and financial position, and reduce our capital commitments on the SDJ coal mine going forward.?
In addition, Tung said, the group is excited by its upcoming plans to enter the Indonesian domestic market to supply coal and to support Indonesia?s 35 GW project and to diversify the group?s business by entering into Indonesia?s Independent Power Producers (IPP) business. Indonesia?s President Joko Widodo?s administration had announced plans to increase Indonesia's power generation capacity by 35 GW between 2015 and 2019 to drive the country's economic growth and channel power to remote regions that have no access to electricity.
?In support of this program, our group incorporated PT Geo Tebo Power Inti on March 8, 2016 to explore opportunities in the power generation business,? he said.
Editing by Reiner Simanjuntak