Straits studying options to boost Sebuku coal output: Report

Spurred by recovering demand from its Asian clients, Australia's Straits Resources Ltd. is studying options to expand its Indonesian thermal coal business, Chief Executive Milan Jerkovic told Dow Jones Newswires on Friday.

The Perth-based company's Sebuku operation south east of Kalimantan Island currently ships around 3 million tons of coal a year to power producers in Japan, Korea, Hong Kong and Malaysia.

Now Straits is looking to add between half and one million tons to annual output in light of improved demand and prices in recent months and a strong long-term outlook, Jerkovic said after a board meeting Friday.

"The general pricing trend is firming up again (after softening from November through January) and we're seeing levels of pricing now that we saw at the peak of the cycle last year," he said in an interview.

"And we're seeing a very firm environment two to three years out for the sort of energy coal we're producing."

Jerkovic flagged a substantial increase in the next few months to Sebuku's thermal coal resources currently estimated at 31 million tons.

"That will give us a platform from which we can undertake this half a million to a million ton increase in production over the next two to three years," he said.

The company could add up to 450,000 tons to annual production within 18 months without having to invest substantially, while a more sizable expansion would require three years to upgrade infrastructure and processing capacities, Jerkovic said.

He said the board is likely to make a decision on the expansion midyear after resource drilling and scoping reviews are completed. (*)