Ilthabi forced to halt E. Kalimantan coal project on financing trouble

East Kalimantan coal mining firm PT.Ilthabi Bara Utama (IBU) is forced to stop development activities at its Pakar mine after US investment banking firm Merrill Lynch suspended further release of funds to the project until refinancing negotiations are concluded, Australian EPC firm Clough Limited said.

Clough?s Indonesian mining contractor subsidiary PT.Petrosea has been working for IBU on a series of contracts to develop and operate the Pakar Coal mine in East Kalimantan.

?Petrosea, in cooperation with IBU has suspended work at the site and has stood down equipment and staff pending the outcome of the refinancing process,? the company said in a statement released on Wednesday.

?IBU has advised that they are confident in the economics of the project and are in advanced negotiations to deal with the funding issue. Petrosea is working constructively with IBU and their Investor group to facilitate a resolution,? it added.

IBU is run by Ilham Habibie, a son of former President BJ Habibie.

The Pakar mine is originally planned to have initial production of 5 million tonnes per annum for both export and domestic consumption by the en of this year. The Pakar Coal project has proven and probable coal reserves of 274 million tons and an overall coal resources of approximately 3.3 billion tons.

Habibie said in November 7, 2007 that Merrill Lynch, together with several private funds had agreed to loan US$135 million of funds to IBU and offtake its entire production.

Clough did not give detail about the reason of renegotiation reason.(denny)