UPDATE ON FAST-TRACK TO PRODUCTION
• New transport solution for Fast-Track production identified which may considerably decrease Capex requirements.
• Increase in initial tonnage target in first year up to 3 Mt and second year up to 5 Mt.
• Coal upgrading has potential to lift operational pre-tax profit by US$31 per tonne.
Churchill Mining Plc (CHL) the Indonesia focused mining company with a JORC resource of 1.4 billion tonnes of thermal coal at its East Kutai Coal Project (“EKCP”), is pleased to announce significant progress on the transport options it is finalising in order to Fast-Track the project to production in Q4 2009.
New independent studies verified by the Company have concluded that a combination of road and river barge transport is now possible and should be the most capital cost-effective and quickest initial access method to transport the coal from site for the Fast-Track production scenario.
The new studies involved Side Scan Sonar, LIDAR aerial survey and a condition survey of the river. This concluded that access to the Senyiur River, which is a tributary of the Mahakam River south of the EKCP, can be used to transport the coal down to the Mahakam River for transhipment and onto multi-user coal ports at the coast. This access route was previously thought to be restricted. The newly surveyed Senyiur River route could enable shipping of up to 7 Mtpa of coal, starting with delivery of up to 3 Mtpa, which is the increased target for the first full year of production.
Currently, a new multi-user coal barge port is being built on the Senyiur River by a third party. Churchill management is in discussions with the company constructing this river barge port to gain access to the facility, which would result in a significant reduction in capital expenditure for Churchill. The Company is also in discussions with the owners of current and proposed multi-user coal ports on the coast, which if access is gained, will also add significant further reductions to Churchill’s project capital costs.
The Company continues its detailed work on a number of options for the 20 Mtpa Full-Production scenario, to transport the coal to a new dedicated port, including a conveyor system.
Infill drilling continues on site and is on target to upgrade much of the 1.42 Bt of coal resource to ‘mineable’ by the end of 2008.
Churchill recently launched a review into coal treatment processes that have the potential to move the energy content of EKCP’s thermal coal from the current range of kcal 4700 – 5600 ADB (Air Dried Basis) to over kcal 6000. This would enable the Company to achieve higher pricing terms for its thermal coal.
Churchill’s examination of processes to upgrade the EKCP thermal coal has determined that the coal sale price assumptions in the Company’s business model could be increased from US$50 per tonne to US$84 per tonne (in the current price environment) at an operational cost of US$3 per tonne.
Churchill Managing Director Paul Mazak commented:
“The various elements of the EKCP are fitting together in a way that should significantly increase the bottom line, especially by upgrading at least part of the coal production to achieve a higher value per tonne. Churchill’s technical team is in the process of finalising their assessment of the available upgrading technologies and it is envisaged that at least one of these plants will be on-stream during the first year of full production.”
UPDATE ON FAST-TRACK TO PRODUCTION