Killara to acquire 85% of E. Kalimantan coal concession

By Puspita Maylana Devi

ASX-listed Killara Resources Limited announced the execution of an MOU where by the company can acquire an 85 percent equity interest in a coal concession PT Prima Bahagia Permai Sejati (PBPS) in East Kalimantan. PBPS will form part of Killara?s (Nunukan Coal Project).

The Nunukan Coal Project now consists of three Izin Usaha Pertambangan (IUP) Exploration concessions that cover a combined area of about 15,l03 ha of the largely underexplored Tarakan Basin including the Meliat, Tabul and Naintupo Formations, the company said in a statement obtained on Tuesday.

Coal mining is carried out by PT Medco Energi Mining lnternasional (MEMI) on its PT Duta Tambang Rekayasa concession 6 km to the south of part of the Nunukan Coal Project. Results from 389 drill holes completed by MEMI on the concession show average coal specifications are low ash (9%), high sulphur (3%) and high energy (6,800Kcal/Kg) for a direct ship coal product.

Killara is currently completing a community liaison and field mapping program across other concessions comprising the Nunukan Coal Project. Once this work is complete, Killara?s team will mobilize to the PBPS concession and conduct general reconnaissance mapping including representative coal sampling. Success in this work would lead to more detailed field mapping designed to identify areas for subsequent drill testing.

The PBPS concession has not been the subject of any systematic coal exploration to date.

After completing a six month due diligence program Killara will have the option to proceed with the transaction via a series of payments based on pre-established milestones which will entitle Killara to an 85% equity interest in the PBPS concession.

Pending a favorable outcome from the six month due diligence program Killara can elect to pay US$100,000 for the concession as an option exercise payment, upon receipt of necessary permits to enable the conduct of exploration activities a further (US$250,000), completion of an initial resource drilling program (US$250,000), upgrade of the concessions to production status and receipt of any necessary permits to enable the conduct of mining activities (US$250,000), completion of a feasibility study and a decision to mine (US$1.65 million) and commencement of commercial production (US$2.5 million). The total payable should Killara elect to proceed through each of the milestones is US$5 million.

Editing by Reiner Simanjuntak