Indonesia: Cokal secures US$20 million in funding to help bring BBM coal project into production

The fresh funding brings the metallurgical coal company a step closer to entering production at its most advanced project. A US$20 million finance facility will help bring Indonesia’s Bumi Barito Mineral Coking Coal Project into production. Cokal Ltd’s Bumi Barito Mineral (BBM) Coking Coal Project could deliver its first coal allocation as early as December after it secured US$20 million in funding to advance the Indonesian project to production.

The metallurgical coal company has inked two binding agreements with International Commodity Trade (ICT) to secure the funding package, which will support the coking coal asset’s development. Specifically, the US$20 million debt financing facility has been allocated under a capital participation agreement, while a separate coal marketing agreement will help Cokal market coal from BBM to the international market and finance its coal stockpile. In exchange, ICT has secured the international marketing rights to market the BBM coal to the overseas market.

Speaking to the agreements, Cokal chairman Domenic Martino said the contracts provided an attractive and strategic funding solution for Cokal, transforming the company to a major international coal producer.

“The funding of the project and additional working capital support has placed the company in a tremendous position to commence mining and production at BBM. “This fully funds the BBM project of which Cokal holds a 60% interest and allows the company to progress into production and generate cashflows. “The funding from ICT is available on similar terms to the previous funding arrangement, which is why Cokal has chosen to obtain the funding from ICT.”

Contract details
Cokal’s new financing facility has been inked with ICT, which is incorporated in Singapore and primarily invests and trades in coal. Cokal can begin to draw from the facility this month. Meanwhile, the ASX-lister’s new coal marketing agreement includes exclusive international coal sales rights across countries in the international market. These include Vietnam, Korea, India, Bangladesh, China and Japan, where ICT will exclusively market, trade and sell coal in these specified regions. As part of the agreement, at least 8 million metric tonnes of coal will be allocated to ICT over eight years, with first delivery expected in December 2021. Now it has inked the funding and marketing contracts, Cokal has decided to terminate a previous funding agreement, announced to the market in October last year.

COVID-19 travel restrictions and security requirements linked to the previous funding package have adversely affected Cokal’s ability to draw down on the financing, which consequently delayed production start-up at BBM.

Cokal is not required to make any payments to finalise the agreement termination.