As part of its strategy to accelerate the commencement of mining operations at the BBM Coking Coal Project in Kalimantan, Indonesia, Cokal Limited has evaluated the technical and financial feasibility of a small-scale initial mine close to the Barito River. Construction can commence immediately funding is secured as all regulatory approvals have been obtained.

The start-up project is likely to produce up to 500,000 tonnes per annum with the objective of delivering a low capital and low cost operation to produce a premium PCI coal in a relatively short time frame. This proposal is expected to generate positive cash flow to assist funding of the larger BBM 2 million tonnes per annum coking coal project.

The work required for the start-up project is a sub-set of the wider program of work in relation to the larger BBM project, which had been reviewed by Resindo in a definitive feasibility study (DFS).

Accordingly, Cokal’s technical feasibility assessment of the start-up project is based on work contained in the BBM DFS, supplemented by relevant modifications to reflect the specific features of the start-up project, such as its smaller scale.

The BBM DFS considered, in relation to the larger project, marketing, tenure and approval processes, mine planning and operation, the coal transport chain and offsite infrastructure, operations strategy, human resources, environment, health and safety and project risks.

Cokal’s technical team has prepared a cost budget for the start-up project which, due to the close proximity of the low stripping ratio PCI coal to a temporary port, indicates a reasonably low capital investment of $10-$12 million to take the project into production. Cokal’s cost assessment is based on relevant parts of the BBM DFS supplemented by firm quotations provided recently from experienced local mining and barging contractors who have been to site.

The project can be constructed within 6 to 8 months of securing finance. The main construction work comprises a 3km haul road and simple barge-loading port on the Barito River within the BBM tenement. A contractor with small 800 tonne barges will take coal down the Upper Barito to an established intermediate stockpile located in deeper waters suitable for larger ocean-going barges.

Cokal has been in discussions with Japanese and Vietnamese markets which have indicated that the PCI product from BBM will attract a premium price for a low-vol PCI, currently fetching US$150/tonne on the spot market.

The company is in advanced negotiations with prospective joint venture and funding parties in respect of this project. Cokal is considering a funding deal to sell down 50% of the discrete PCI project for partial pre-funding of mine capital costs.

Meantime, Cokal has entered into a royalty agreement with its senior lenders in relation to conversion of all outstanding loans to a production royalty.

The royalty agreement is subject to conditions including lender due diligence, Cokal shareholder approval, project funding, commercial production and the grant of security over the royalty. On completion, the monies owing to Platinum Partners and Blumont will be discharged and Cokal will be loan free.

www.cokal.com.au

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