REA Holdings suspends E. Kalimantan coal mines
Saturday, August 23 2014 - 05:27 AM WIB
LSE-listed REA Holdings Plc, which is engaged in plantation and mining, said Friday that due to the lingering weak coal price, it has agreed to suspend production at the Kota Bangun and Liburdinding concessions in East Kalimantan.
As had been previously announced the company has put in place arrangements with two separate third parties for the development and operation of two of the three coal concessions held by the group, the Kota Bangun and Liburdinding concessions. These arrangements were intended to provide an income stream to the group calculated by reference to coal prices prevailing from time to time but subject to an agreed floor.
?However, in recent weeks, international coal prices have fallen significantly and this has had negative consequences for the arrangements. In the case of Kota Bangun, the agreement to give effect to the arrangements was duly completed and coal production had been started but, with prices realisable for coal produced falling below the cost of producing it, the group has been obliged to accept that mining operations be suspended. In the case of Liburdinding, the third party proposing to take on the development and operation of the concession has withdrawn,? REA Holdings said.
?The agreement regarding Kota Bangun remains in place and mining operations will be resumed as soon as coal prices recover,? it added.
The group said that when that occurs, it will endeavor to arrange a new project agreement for Liburdinding on terms similar to those previously contemplated. In the meanwhile, expenditure on the concessions is being kept to a minimum with such expenditure as is being incurred on the Kota Bangun concession being borne mainly by the third party operator.
Elsewhere, REA Holdings said that following the implementation agreement reached earlier in 2014 in respect of the agreed swap of land currently held by its subsidiary PT Sasana Yudha Bhakti (and the subject of overlapping coal rights) for land held by PT Praesetia Utama (PU), work has commenced on the establishment of a master plan for the development of the PU land and, in particular, on the identification of areas to be designated as conservation areas.
The group said it continues actively to pursue the titling of the untitled land allocations that it currently holds and to explore opportunities to acquire additional land areas suitable for development in the vicinity of its existing operations so that in due course further plantable hectares may become available for both group and smallholder developments.
The group holds three coal mining concessions, all of which are located in East Kalimantan in Indonesia
The coal mining concessions comprise a high calorific value deposit near Kota Bangun and the lower grade, and broadly adjacent, Liburdinding and Muser concessions in the southern part of East Kalimantan.
Editing by Reiner Simanjuntak