Jatenergy proceeds with second fast-to-production coal mine
Monday, August 22 2011 - 02:52 AM WIB
The Jongkang project, located 5 km along an existing haul road from the Mahakam River and about 25km from a major hub of Indonesia?s coal industry at Samarinda, is being developed by an existing coal mine operator, CV Wijaya Mulia.
Jatenergy has signed a heads of agreement with the Indonesian company, which is well known to Jatenergy?s Chief Operating Officer for Indonesia, Chris Flanagan.
Under the agreement, Jatenergy covers the working capital costs of the operation, expected to be a maximum of US$2 million, while gaining the rights to 30% of the mining margin and the ability to market 100% of the coal produced.
The transaction is subject to final legal and technical due diligence, which is expected to take about four weeks, and the development of the mine is expected to progress quickly, given CV Wijaya Mulia is already mobilized on an adjacent site.
The company expects to secure a production license for Jongkang by the end of September, along with the execution of a final JV agreement.
CV Wijaya Mulia will provide the tenements and management team, while the mining, haulage and shipping will be undertaken by experienced contractors which currently operate two adjoining mines for the owners of CV Wijaya Mulia.
Jatenergy?s Chief Executive Phil Hodgson said that the cash flows expected next year from Jongkang and also the company?s Atan Bara coal project would be used to fund further development of the company.
?Once we achieve cash flows, they will be used to fund a very important development program for Jatenergy, to define and hopefully mine coal from our Katingan project in Central Kalimantan,? he said. ?When proven, Katingan will become Jatenergy?s showcase operation.?
Katingan has a potential exploration target of 36.4 - 43.1 million tons of medium quality thermal coal and is located in central Kalimantan. Drilling to define a JORC resource is scheduled to commence during the second half of 2011, once cash flows are established. Future work may or may not delineate or outline this target in part or in whole.
Other ventures in central Kalimantan include BHP Billiton?s Maruwai project, which is expected to cost up to US$1 billion and produce 6 million tons a year. Realm Resources has committed $27 million for a 75% stake of a project called Katingan Ria, which has an inferred resource of 40.1 million tons.
A third Australian company, Cokal, has bought into four exploration areas in central Kalimantan with the aim of developing a coking coal operation.
Indonesian energy ministry records say that the coal associated with the new project is of high thermal quality with high gross calorific value (6400-6674 kcal/kg adb), sulphur below 1% and low ash and moisture.
The ministry records also show that Jongkang contains five coal seams ranging between 0.2m and 1.6m in thickness. FOB Barge prices for this type of coal are conservatively estimated at US $ 85 to $ 90 per tonne, based upon the latest Indonesian Coal Reference Price (HBA) as sourced from DJMBP ? ESDM, Indonesia.
?Adding a second fast-to-production mine to our portfolio ahead of plan is a great testament to our local team,? Hodgson said. ?Given the opportunity to leverage Wijaya Mulia?s current operational infrastructure for mining and export, we expect we can develop the mine quickly and generate revenues this year.?
Jatenergy is also currently conducting an Entitlement Issue in which eligible shareholders are offered one option for every two shares held as at 23 August 2011. The issue is expected to raise approximately $393,000 before costs. (romel)