Cokal Limited (ASX:CKA) has entered into an agreement to monetise near-term coal production from the Bumi Barito Mineral coking coal project (BBM) in Indonesia.
Indonesia’s PT Sumber Global Energy (SGE) will advance BBM a total of US$2 million as consideration for Cokal appointing SGE as Exclusive Sales Agent for domestic Indonesia coal sales, whereby SGE will undertake the marketing and sales of BBM coal, sold into the Indonesian domestic market, for a period of two years from the date of first delivery of coal to SGE.
BBM has agreed to allocate SGE ~0.6Mt of saleable production of Coking and PCI coals to SGE over the two-year period.
SGE will pay BBM according to the following schedule:
- US$1,000,000 on or before the December 30, 2020;
- US$500,000 on or before the January 31, 2021; and
- US$500,000 on or before March 31, 2021.
BBM will repay the US$2 million to SGE through a reduction in the coal sales price over the term of the Agreement. The repayment schedule to SGE will be calculated by apportioning the US$2 million consideration over the total tonnage of coal allocated to SGE over the term of the Agreement, which will be deducted from the sales price (e.g. If BBM allocates 0.6Mt of coal to SGE, then the US$2 million in consideration will result in a US$3.33/t reduction in coal sales price.)
The reduction in coal sales price shall be adjusted in the final period of the Agreement to ensure full repayment of the US$2 million consideration.
SGE will also receive a small discount off the Coal Sales Prices. In the event SGE is able to sell the coal at a price higher than the Coal Sales Prices, the additional amount shall be shared equally between BBM and SGE.
Chairman Domenic Martino said this offtake advance agreement with SGE, coupled with the previous binding funding arrangement with CRCC, reflects the confidence placed in Cokal’s production plan by these substantial third party providers and underpins Cokal’s production start-up in 2021.
“This is another critical milestone achieved through the expertise and contacts of the Company’s well regarded Indonesian based operational team”
BBM is Cokal’s most advanced project – a high quality metallurgical coal project, located in the Central Province, Kalimantan, Indonesia with a mining lease area of 14,980ha.
Cokal is focused on the near-term development of BBM, having recently received a binding funding commitment that provides the required capital for the development of BBM (please refer below and to Cokal’s ASX Announcement dated 14 October 2020).
SGE is an Indonesian incorporated company, listed on the Jakarta Stock Exchange, specialising in domestic coal trading. SGE was incorporated in 2008 and has established itself as a leading domestic coal trading company, with supply from first-class mines to ensure long term sufficiency of supply for a variety of customers, serving both international and domestic coal markets.