This month in coal: Biliton signs Indonesian joint venture
Billiton Signs Indonesian Joint Venture
Mining group Billiton plc, through its subsidiaries Billiton Indonesia BV and Billiton Coal Taraco BV, has signed a joint venture agreement with Winnin Pty. Ltd. and PT Taraco Mining over a coal exploration area in Indonesia.
Winnin is a subsidiary of Japan’s Nissho Iwai Corp. Indonesia-based Taraco holds a Coal Contract of Work (CCOW) from the Indonesian government, which permits coal exploration in an area east of Kalimantan.
Billiton and Winnin will acquire 51% and 9% respectively of Taraco for $1.2M, according to Billiton.
Billiton and Winnin will also provide funding for exploration with Taraco refunding its share of expenditure if mining occurs.
WORLD COAL NEWS
Global Link Technologies Inc. (GLTK) has received its final due diligence report for coal reserves at the company’s Sororia and Santa Constanza coal properties in the State of Cesar in northern Colombia. The reserves consist of high quality steam coal with an average value of 12,600 BTU/lb.
The initial mine operation will consist of an open pit excavation of 6.6M st of coal on the Sororia Mine. The Sororia operations are scheduled to begin in the fourth quarter 1999, with expected net revenue earnings of $300K during this period. Net revenue earnings in year 2000 for Sororia and Santa Constanza are projected to be $2.5M. The company is negotiating options for acquiring four additional coal properties contiguous to the Sororia and Santa Constanza.
GLTK’S coal mining division was expected to exercise its options and enter into definitive purchase agreements for Sororia and Santa Constanza by the beginning of September. Acquisition funding has been established through private lending sources. Additional development funding will be provided from arrangements with international institutional investors. The coal marketing sales contracts are being negotiated and will be concluded pending the closing of the property possession by GLTK.
Coal India Ltd. (CIL) has scaled down its production target for 1998-99 because of cheap imports and lower demand from bulk consumers. A senior company official says the company has reduced its production target for 1998-99 (April-March) from 268.8M mt to 265M mt. CIL, which has a near-monopoly position in the coal sector, increased its output by 4% in 1997-98 to 260.55M mt. Its output grew by 5.6% in 1996-97. The output growth slowed after 1995-96, when it was up 6.4% at 237.27M mt. CIL, which posted a turnover of $4.44B in 1997-98 against $3.92B in 1996-97, will increase its output by only 1.72% to meet the revised target for 1998-99.
The demand from the power sector, which consumes about 70% of the output, fell by 2.0% in the first quarter of 1998-99. Offtake from other bulk buyers-cement, steel, and fertilizer sectors-had also declined. The firm, however, expected a future surge in demand from power projects, which were expected to be set up in the next few years.
The Planning Commission of India has asked for more financial incentives and concessions from the government for the coal sector at par with other infrastructure sectors to attract private investment into the sector. Financial incentives and concessions, as applicable to infrastructure industries such as the power and telecommunications sectors, would need to be extended to this sector, the commission said in its action plan for rapid improvement in physical infrastructure.
Such incentives would facilitate increased market borrowings and easy access to capital market for coal companies. The project costs would also come down as a result of lower import duties on plant and machinery products, which form a major part of the cost of projects.
The plan panel also said it was important to bring in necessary legislative changes in order to facilitate private sector participation in coal production and distribution. Currently, the Coal Mines (Nationalization) Act of 1973 bars private investment in coal mines except for captive mines. The bill to privatize the coal sector is likely to be introduced in the winter session of parliament. The action plan called for formulation and implementation of more lignite projects and lignite-based power plants to avoid unnecessary coal transportation costs and stress on railway infrastructure.
It also came down against neglect of development of underground mines in favor of open cast mines. The action plan projects a total coal production of 370.6M mt by the terminal year of the ninth fiveyear plan, up from 295.87M mt in 1997-98. The demand-supply gap is expected to rise to 41.60M mt in 2001-02 from 8.84M mt last year.
The Indonesian government awarded 12 Coal Contracts of Work (CCOW) to local investors to explore and develop more than 427K ha coal resources in Central Kalimantan, East Kalimantan, South Kalimantan, and South Sumatera provinces. Three contracts in East Kalimantan have been awarded to PT Bumi Laksana Perkasa (11.33K ha), PT Dayalapan (88.38K ha), and PT Wadungmas Tambang Mulia (20.77K ha). Two contracts in Central Kalimantan were awarded to PT Asmin Bara Bronang (85.54K ha) and PT Asmin Koalindo Tuhup (40.16K ha). One contract for an area in the border of Central Kalimantan and South Kalimantan has been awarded to PT Torah Antareja Mining (6906K ha). PT Baramuli Suksesarana (16.02K), PT Sumber Kurnia Buana (10.92K ha), and PD Baramarta (7,486 ha) were each awarded contracts in South Kalimantan. The remaining two contracts were awarded to PT Energi Batubara Sumatera (33.70K ha) and PT Pinangjaya Sarana Bara (32.65K ha) in South Sumatera.
With these signings, the national mining companies may begin their general survey operations. Each company is given a period of two years to complete the general survey. Subsequently, the company will be given three years for exploration, and, if in this period the contractor is unable to meet its expenditure commitments, the government may either terminate the CCOW or require a bond for the outstanding obligations.
Contractors must hand over 13.5% of their cash-based production on the basis of free-on-board or sale-point prices.
In addition to those contracts, the government had granted coal mining licenses to seven cooperatives/Koperasi Unit Desa (KUD) in South Kalimantan. These seven mining licenses cover more than 15.7K ha. So far, the coal mining production capacity these cooperatives is still small. In 1997, they produced approximately 171K st (0.3% of the total national production), while in 1998 this increased to roughly 272K st, or 0.4% of the total national production.-PC
Copyright PRIMEDIA Intertec Sep 1999
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