A recently completed update of the Definitive Feasibility Study (DFS) for Cokal Limited's Bumi Barito Minerals (BBM) Coking Coal Project in Central Kalimantan, Indonesia, indicates significant reductions in capital and operating costs.

The update, which was conducted by consultants PT Resindo Resources, shows that together with the recent increase in coking coal pricing and its proximity to the growing Asian markets, BBM has become an attractive investment opportunity.

The Base DFS was completed in 2014 and since that time Cokal has continued to complete a number of engineering studies and reviews such as geotechnical and hydrology and contractor negotiations. These resulted in some scope changes and costing refinements none of which materially impacted the base estimate but did improve the accuracy of the estimate.

The two key factors affecting costs which have changed from the Base DFS are the FOREX US$ - Indonesian Rupiah (IDR) forecast and the fluctuations in the price of fuel.

Forex between US$ and IDR is based on www.tradingeconomics.com analysts forecast predicted on Monday, October 17, 2016. This source’s Forex estimate in Q3 of 2017 is US$1 : IDR13,497. This forecast is considered to be a best case position. However, a conservative approach has been adopted by Resindo, downgrading this rate to US$1 : IDR13,000 for this DFS update.

Highlights:

  • The DFS update has continued to show that the BBM coal mine and associated transport system can be developed as a low capital cost operation with moderate to medium range operating cost. The update maintained the development as a 2 million tonnes per annum open cut mining operation over 10 years. BBM’s relatively low ash, low volatile, low sulphur, low phosphorus coking coal would command a high value as a blending feed in the premium coking coal market.
  • Capital costs have fallen by 10.3% to US$68 million from the base DFS of US$75 million.
  • The already low cash operating costs (excluding royalties of 7%) unit rates have fallen 15.5% to:
    - Year 1 average US$58/tonne (Base DFS: US$65/tonne);
    - First 5 years average US$70/tonne (Base: US$82/tonne);
    - Life of mine average US$82/tonne (Base: US$97/tonne).
  • The production and investment profiles are phased for:
    - Initial start-up capital US$47 million (Base: US$50 million); and
    - After start up: Enhancement capital US$21 million (Base: US$25 million) - Expand blending operations at the Intermediate port of Kelanis, and increase coal handling capability for the higher ash pits.
  • Initial construction is expected to take approximately 12 month, with first production from BBM scheduled for the first quarter after construction is completed.

BBM’s Production IUP covers an area of 14,980 hectares and has received all the necessary regulatory approvals, including Forestry Department; the IPPKH (Forestry Permit) which allows for construction and operation of the port, haul road and initial mine development areas for Cokal’s initial mine plan of 2 million tonnes per annum of premium coking coal from BBM.

The BBM IUP straddles the Barito River and has numerous outcrops of bright coal. Coal core samples analysis confirmed BBM’s coal to be a premium coking coal with Crucible Swell Numbers values generally 9 or more.

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