Geo Energy unit to operate S. Kalimantan port

By Romel S. Gurky

SGX-listed Geo Energy Resources Ltd, an Indonesian coal mining specialist, announced Monday that the group?s subsidiary, PT Sumber Bara Jaya (SBJ) has today signed a cooperation agreement with PT Bandar Laut Biru (BLB) for the management and operation of a port terminal for 15 years.

Under the terms of the cooperation agreement, SBJ has been appointed by BLB to manage and operate the port terminal, located in South Kalimantan, for public interest, Geo Energy said in a statement.

Such services include, inter alia, (i) managing and operating the jetty as well as all facilities and infrastructure at the port terminal; (ii) construction of a new conveyor belt, crusher and related facilities; and (iii) providing periodic maintenance and repair of the aforesaid facilities.

The statement added that the signing of the cooperation agreement also provides the group with additional benefits, as the group is now able to (i) increase its revenue stream through the handling of coal from third party coal miners while concurrently taking on BLB?s existing portfolio of customers; (ii) have certainty over future logistics schedule of its Sungai Danau Jaya (SDJ) coal concessions in South Kalimantan, and at the same time lower its own logistical and operational expenses due to reduced reliance on external port operators; and (iii) provide the group with a wider network and additional opportunities for coal trading and marketing of third parties? coal.

Geo Energy said it will also be constructing a new conveyor belt within the next two years. This new conveyor belt will run approximately 800 meters into the Java Sea, hence allowing large barges to be loaded directly and not be subject to tidal conditions.

The strategically located port terminal, which has an existing maximum capacity to handle 4.8 million tons of coal per annum, will have its capacity increased to 22.8 million tons per annum upon the completion of the proposed conveyor belt, an increase of 3.75 times of its current capacity, Geo Energy said.

?We understand that the current Port Service Fee paid by customers are in excess of Rp 65,000 (approx.US$5.38) per metric ton. With a fixed income fee payable to BLB of Rp 30,000 (approx.US$2.44) per metric ton and after operational costs, we believe this will result in a positive contribution to our group?s financial performance. This will be further magnified with the completion of the proposed conveyor belt for the existing loading facility,? said Geo Energy Executive Chairman, Antonny Melati.

?As a coal port operator, Geo Energy will slowly transition from being a coal miner and mining services provider to being an integrated coal mining group with upstream and downstream capabilities,? he added.

In August 2014, the group had previously announced the completion of the acquisition SDJ concession, spanning a total area of approximately 235.5 hectares, located in South Kalimantan. The completion of the SDJ acquisition has increased the group?s coal reserves by more than 4 fold, from approximately 11 million tons to more than 50 million tons and the group is now prepared to ramp up production as coal from the SDJ concession, with an average calorific value of 4,038 kcal/kg (GAR), is valued for its versatility due to the requirements of power plants in China, India and Indonesia.

Elsewhere, 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