Strike signs E. Kalimantan coal supply deal with Chinese, Taiwanese firms

Australian firm Strike Resources Limited announced on Monday it had signed two Heads of Agreement (HoA) for the sale of a total of 2.4 million tonnes of coal over a two year period from its Berau Coal Project in East Kalimantan to leading industrial companies in China and Taiwan.

The first HoA is with Taiwanese firm Formosa Plastics Group (FPG) for the purchase of for the purchase of 1.2 million tonnes of coal over the term of the agreement (+/-10% at the buyer?s discretion) to be mined from Strike?s Berau Coal Project.

FPG is a leading Taiwanese manufacturing corporation established in 1954 and is the world?s largest manufacturer of PVC resins.

The second HoA is with The China National Building Materials & Equipment Import & Export Corporation (CNBM International) for the purchase of 1.2 million tonnes of coal over the term of the agreement (+/-10% at the buyer?s discretion).

Both HoAs called for initial period of two years. Coal shipments are required to be made in approximately equal amounts spaced evenly over the term of the agreement.

The agreements required the commencement date for supply of coal to be no later than 30 April 2010.

The coal price under the FPG HoA will be determined by reference to the higher of the globalCOAL Newcastle Coal Index (NEWC Index) (with a proportionate adjustment to reflect any difference in the gross calorific value of coal sold versus the assumed gross calorific value of coal in the NEWC Index) or the price at which coal is required to be sold under Indonesia?s New Mining Law.

The coal price under the CNBM heads of agreement will be negotiated in the formal agreement indicatively by reference to the globalCOAL Newcastle Coal Index or another institution agreed by both parties.

The agreements are subject to the negotiation of a formal binding agreement consistent with the terms of the FPG heads of agreement. In the event that a formal agreement cannot be executed either party may terminate the heads of agreement.

Strike operates the Berau Coal project in the concessions totaling 5,000 hectares in Berau regency. The company has completed feasibility study which focused on the development of open cut mining operations with production scaling up to 1.5MTPA to 3MTPA, with transportation 30kms by road to a new port for barging approximately 90kms down the Segah River to the coast and on to an established coal trans-shipment location approximately 30km offshore.

The mine is expected to start production in the first half of 2010. (alex)