Tabang coal upgrading plant in limbo

The future of Tabang coal upgrading plant is becoming uncertain after Bayan Resources, the partner which holds 49 percent stake in the joint venture expressed doubts about the project?s economic viability.

?Bayan has advised that based on the current export prices of coal, they have formed the view that the cost associated with upgrading the Tabang run of mine coal may no longer deliver acceptable economic returns for KSC. The key factor in arriving at this position is Bayan?s insistence that the contract price for Tabang run of mine coal must be increased to a price substantially higher than that incorporated in the original coal supply agreement entered into between the parties,? the JV?s partner White Energy Company ( WEC ) said in a statement on Wednesday..

PT Kaltim Supacoal (KSC) is a JV company owned 51% by WEC and 49% by PT Bayan Resources Tbk . It was formed in 2006 to construct, commission and operate a 1 million tonne per annum coal upgrading plant at Bayan?s Tabang coal mine in East Kalimantan.

?In this regard, Bayan has advised that it can generate much higher margins by selling Tabang run of mine coal directly into the export market, given that the current Indonesian government coal reference price (HBA) for 4,200 Kcal/kg GAR coal is approximately US$60/tonne FOB, which equates to approximately US$40/tonne ex-mine.

These issues go directly to the economic viability of the existing plant located at the Tabang site and the willingness of each of the shareholders to continue with their investment in KSC,? WEC added.

Following a request from Bayan, both shareholders will determine the appropriate steps to be taken in relation to KSC and the operation of the Tabang plant by no later than 31 December 2011.

According to WEC, Bayan?s management acknowledges that the Tabang run of mine coal can be upgraded from approximately 4,200 Kcals/kg GAR to approximately 6,000 Kcals/kg GAR using the binderless coal briquetting (BCB) technology. However, they have expressed concern over material handling issues; in particular the level of dust generated which is a characteristic of all bulk materials, including sub-bituminous coals. The current plant modification work at Tabang includes installation of a more sophisticated product handling and stockpiling system.

KSC is currently in the process of completing a number of key engineering modifications to enable the Tabang plant to run at its design capacity. These modifications have been funded by White Energy and are scheduled to be finalized by the end of this month.

The Tabang plant is the first large scale binderless coal briquetting plant constructed in the world. White Energy acknowledges that the expenditure on this plant has been significantly higher than originally anticipated due to several factors and changes.

Managing Director & CEO of WEC , Brian Flannery, said; ?We are committed to the Indonesian market, which has large scale deposits of sub-bituminous coal, well suited to our briquetting technology.?

We believe Indonesia needs the technology and we are in talks with several other Indonesian coal producers regarding the adoption of our BCB technology.?(alex)