Sebuku achieves record coal production and sales in 2004

Despite difficulties in early 2004 related to minor illegal blockades and an extended wet season, Sebuku coal mine in South Kalimantan achieved record production and sales in the year, Australian mining firm Straits Resources Limited said in its 2004 annual report.

Straits said production rates have steadily increased at Sebuku and 2004 production of 2.55 million tons was more than a million tons higher than five years previously, while sales rose to 2.65 million tons a 30 percent increase from 2003.

?By the end of the year Straits had signed up long-term supply agreements with power companies in Japan, Korea and Hong Kong to add to its ongoing supply relationship with a major utility in Malaysia,? Straits said, adding that most of these contracts extend over 3 to 5 years with annual pricing arrangements through negotiated settlement or market reference factors.

According to Straits, the contracts are deliberately staged over different parts of the calendar year in order to limit exposure to any volatile market fluctuations. As the tonnage allocated to these new contracts has increased, so the amount of Sebuku coal supplied into the spot market has diminished with the subsequent increase in revenue levels and margins.

Straits said this trend will continue into 2005 with virtually all of the production from Sebuku being sold into the new and existing term contracts.

?The next challenge is to fully utilise the expanding coal preparation wash plant to potentially take output to 3 million tons annually and beyond. Consideration will be given to expanding into processing of locally available coal from outside sources to achieve this objective and to enhance mine life,? Straits added.

Straits also said coal mining focused on the Kanibungan pit until it was mined out in the 4th quarter of 2004. For 2005, the mining activities will be in the Tanah Putih Pit and Middle Pit with the majority of the coal coming from Tanah Putih. This coal contains less sulphur than the other pits on Sebuku, a fact that has contributed to the expansion of coal sales into the premium Asian power utility business.

?The discovery of some additional, relatively low strip ratio coal reserves adjoining the mined out Kanibungan pit will provide a back-up supply of coal inventory to mitigate risks associated with the wet season,? Straits said.

Straits has an 80 percent ownership in PT Bahari Cakrawala Sebuku, which operates the coal mine by an opencut truck and shovel coal mining method. The remaining 20 percent stake is held by PT Reyka Wahana Digdjaya.

Straits has reached agreement to purchase Reyka's stakes for about A$20 million.(robert)