Completion of the acquisition of 80% of East Kalimantan thermal coal producer PT Borneo Emas Hitam (BEH) has seen Killara Resource transition from junior mining explorer to an Indonesian coal producer. Together with strategic alliance partner and major shareholder, the Zulkarnaen family, Killara will pay $2.2 million for its share of BEH.
In addition, Killara has also obtained an option to acquire a 60% interest in PT Pagun Taka, a prospective Central Kalimantan concession. The transaction provides ASX-listed Killara with both a coal producing mine and a greenfield coal opportunity.
The agreement sees operational control for BEH move to Killara, which will also nominate personnel to join the BEH Board, thus gaining majority representation. Killara will also pay US$3 per tonne above a mineable reserve threshold of 733,333 tonnes, ensuring that the cost of acquisition remains at US$3 per tonne. Mineable reserve estimates are subject to an independent technical assessment.
Killara has completed the first phase of technical due diligence and field reconnaissance at BEH. Company officials say current production permitting, land compensation, infrastructure, forestry classification and geological information should allow Killara to commence mining activities in 4 to 6 months.
The production permit (IUP) is listed as ‘clean and clear’ by the government. The IUP covers a 1002-hectare area in Tenggarong district, East Kalimantan Regency. The mining licence expires in January 2014 with an automatic right for renewal with BEH.
A drilling program is being developed which focuses on two short-term production targets that have been subject to land compensation. This program is expected to take two months to complete and will allow for detailed mine planning.
Mining was ongoing at BEH until early 2013 with some coal stockpiled at a nearby facility. Infrastructure, including roads, office and a workshop, remains onsite and may be immediately reactivated. Existing roads give barge loading facilities access for all 5km hauls from production. These load onto the Mahakam River which at the loading point is 450 metres wide and has year-round use. Transhipment facilities lie 150km downstream at the Samarinda Delta.