Realm revises downward cash cost projection of C. Kalimantan coal project
Thursday, December 11 2014 - 01:05 AM WIB
ASX-listed Realm Resources Limited announced Thursday the results of a review of the operating cost assumptions used in the feasibility study and the valuation for its 51 percent owned Katingan Ria thermal coal project in Central Kalimantan.
As industry operating costs have declined by up to 30 percent over the last two years in parallel with falling commodity prices and profitability, and the strengthening US dollar. Katingan Ria?s unit operating cost forecasts have subsequently been reduced by approximately US$8 per ton or 20 percent following a review by management and their consultants, Realm said in a statement.
?Importantly the forecast life of mine (LOM) unit cost for the operation before royalties has reduced to ~ $31/t which is below the current spot coal price expected for Katingan Ria coal (i.e. 4,200 Kcal/Kg GAR at $36/t),? the company said.
?Management has also reduced its long term price forecast for Katingan Ria?s coal quality to $42.50/t (vs. $52.00/t) in line with industry consensus forecasts,? it added.
Based on the long term price and revised cost assumptions, the NPV (10%) valuation for Katingan Ria (100%) declines marginally to $100 million (vs. $111m) for the 3Mtpa dozer push mining method case as defined in the Feasibility Study. The NPV at spot prices is $29m.
Oversupply continues to plague the thermal coal market; however, it is showing signs of stabilizing due to a number of mine closures and modest demand growth, particularly from India. Coal prices, which are stabilizing in US$ terms, are beginning to rise in producer currency terms as the US$ strengthens, the company said.
The company said it is continuing to engage with prospective buyers and/or strategic off take partners interested in the company?s development ready thermal coal project in Central Kalimantan. Interest has been directed at domestic supply opportunities and specifically PLN?s (Indonesian State owned Electricity Corporation) proposed 200Mw power station development in the vicinity of Kasongan, as well as increased interest from Indian parties seeking to procure coal supplies for their power sector.
Realm?s 51 percent owned Katingan Ria thermal coal project is ideally suited to supply a proposed power station in Central Kalimantan. Efforts to engage with PLN about the proposed 2 x 100MW power station development in the vicinity of the project were unfortunately delayed by the Indonesian elections and likely changes to officials. Management expects to accelerate discussions now that elections have been completed as a number of major power developers have expressed interest in partnering with Realm.
Editing by Reiner Simanjuntak