Cokal Ltd (ASX:CKA) has seen its share price rise more than 9% as it announced plans for underground mining from Pit 1 of the Bumi Barito Mineral (BBM) Metallurgical Coal Mine in Indonesia, producing a pulverised coal injection (PCI) product at no cost to the company itself.
At 15:16 AEST, Cokal shares were trading at 8.9 cents, a rise of 9.88% since the market opened.
Although a 2014 feasibility study for the BBM project had highlighted the importance of an underground operation from Pit 1, this was not expected to take off anytime in the near future.
However, Cokal’s subsidiary PT Bumi Barito Mineral has recently signed a binding agreement with mining contractor PT Cipta Bersama Indonesia (CBI) to develop this type of mine, with plans to produce PCI within 18 months.
CBI will take on responsibility for both underground mine development and operations, also paying all mine development costs, and all ongoing operating costs up to the point of product delivery to BBM ROM stockpile.
From there, Cokal would transport it to Batu Tuhup jetty and then to market, and would additionally be responsible for sales and marketing of the coal product.
The sale of this would produce revenue shared by both companies, with BBM to take 40% and CBI 60%.
Cokal CEO Karan Bangur said the agreement was another step in BBM’s development and ramp-up plans.
“Prior to the Agreement with CBI, BBM did not anticipate any underground mine development for at least another decade,” he said.
“This Agreement brings that production forward and is entirely in addition to the current targets of coal production from the open pit operations at BBM.
“This will add additional cashflow and enhanced value to Cokal.
“In addition, the additional coal volumes will utilise and enhance the value of the extensive
coal transport logistics chain that Cokal has developed and is expanding.”