Cokal to Start Underground Operations at BBM Coal Mine

Cokal Limited has announced that its 60% owned subsidiary, PT Bumi Barito Mineral (BBM), has formalized a binding agreement with PT Cipta Bersama Indonesia (CBI) to establish an underground mining operation at BBM Pit 1 for PCI coal production. This strategic partnership is a notable advancement for Cokal, as it had not anticipated the development of underground operations at BBM Pit 1 in the near term due to capital limitations and the high level of technical expertise required. Given the company's previous financial constraints and limited technical expertise in underground mining, this collaboration presents a unique opportunity to unlock the full potential of the BBM metallurgical coal mine.

The 2014 Feasibility Study conducted by Cokal for the BBM project emphasized the strategic importance of developing an underground mining operation at BBM Pit 1. The study identified that a substantial portion of Cokal’s JORC coal resources is most economically viable for extraction through underground mining. This approach is advantageous due to lower strip ratios and reduced unit production costs, as well as favorable long-term market projections for PCI (Pulverized Coal Injection) coal products. The findings suggest that underground mining will optimize financial returns and leverage the long-term value of Cokal’s coal resources effectively.

BBM is in the process of securing the required regulatory approvals to commence underground mining operations at BBM Pit 1. The company has appointed CBI as the lead contractor responsible for developing the underground mine and managing ongoing PCI coal production activities. Under the terms of the agreement, CBI will cover all costs associated with mine development and will also bear 100% of the ongoing operating expenses until coal is delivered to the run-of-mine (ROM) stockpile. This arrangement aims to streamline the development process and ensure efficient and cost-effective operations for BBM’s coal production project.

Cokal will handle the transportation of the product coal from the BBM run-of-mine (ROM) stockpile to the Batu Tuhup jetty, and subsequently to the market, as well as oversee the sales and marketing of the coal. BBM is responsible for constructing and overseeing the expansion of coal transport infrastructure to ensure seamless delivery of coal from its Pit 1 underground mine to commercial markets. Importantly, BBM is not obligated to reimburse CBI for any of the upfront capital or ongoing operating costs incurred by CBI. Instead, revenue from the sale of the coal will be shared between BBM and CBI, with BBM receiving 40% and CBI 60%.

PT. Cipta Bersama Indonesia (CBI) is a specialized contractor offering comprehensive solutions for underground coal mine development and associated infrastructure. Leveraging its technical expertise, CBI provides essential resources and support to ensure the successful establishment and operation of underground mining projects.