The imminent announcement could indeed be related to KRL and a possible future supply of Tabang with coal from KRL's Pakar coal project, which is adjacent to Tabang and is run by Bayan. Actually I posted a few details about Pakar back in June, when I even described KRL as a potential future JV partner (see http://wwww.hotcopper.com/post_single.asp?fid=1&tid=1476834&msgid=8472963).
Production commence at Pakar should be imminent and the slightly higher CV of Pakar coal (>4600 kcal/kg vs. Tabang's 4400 kcal/kg) could perhaps lift post-processing CV of BCB-briquettes by 200 kcal/kg so we definitely get Newcastle specs (6100 kcal/kg). Whether for supply redundancy or for blending coals or briquettes - WEC have said they would build future plants rather further downstream where logistics are less complicated and COULD BE SUPPLIED BY MORE THAN ONE MINE. Bayan doesn't provide separate figures for their Tabang mine, so I can't say how much coal Tabang produces. However their Q2 investor update (http://www.bayan.com.sg/dlw/IU/Investor%20Presentation%202Q11.pdf) gives consolidated figures for the "Fajar, Tabang, Brian" (FTB) mines, which have together produced 0.9 Mt (10% below budget) during Q2. So even if all the coal came only from Tabang, yearly production would amount to less than 2 Mt. Assuming a processing ratio of 1.35 (1.35 t coal required to produce 1 t of briquettes) this could supply only 1.5 BCB plants. But according to Bayan's annual report KEPCO, who acquired a 20% stake of Bayan last year and entered into long term coal off-take agreements, is primarily supplied with coal sourced from the Tabang concessions. All in all this means that at the Tabang mine currently there's probably even too few coal available to feed a single BCB plant. This is why KSC perhaps tries to secure an additional coal source for their Tabang plant. So it would absoutely make sense if WEC entered into an sales agreement with KRL in order to get coal from their Pakar mine.
WEC Price at posting:
$1.51 Sentiment: Buy Disclosure: Held
