Cokal's 60% owned subsidiary, Bumi Barito Mineral (BBM), has entered a binding agreement with Cipta Bersama Indonesia (CBI) to initiate underground coal production at the BBM Metallurgical Coal Mine's Pit 1.

This partnership is set to produce a PCI coal product without any capital expenditure for Cokal.

The 2014 Feasibility Study by Cokal underscored the potential benefits of an underground operation at BBM Pit 1, which could access a substantial portion of Cokal’s JORC coal resources more effectively.

The study indicated that underground mining could enhance financial returns due to lower strip-ratios and unit production costs, coupled with a positive market outlook for PCI coal products.

Under the agreement, BBM will secure the necessary regulatory approvals for the underground operations, while CBI will shoulder all mine development and operating costs up to the point of coal delivery to the run-of-mine (ROM) stockpile.

Cokal will manage the transportation of coal from the ROM to the Batu Tuhup jetty and onwards to the market, as well as handle sales and marketing.

BBM is tasked with developing additional coal transport infrastructure to support the delivery of coal from the underground mine to the market.

In a revenue-sharing arrangement, BBM will receive 40% of sales, with CBI taking the remaining 60%. Notably, BBM is not required to reimburse CBI for any incurred costs.

CBI has also committed to establishing coal processing infrastructure at BBM, which will serve both the underground and other production operations. The agreement spans the life of the mine for underground mining at BBM Pit 1.

The development of the BBM Pit 1 underground coal mine will unfold in three stages.

Stage I involves a feasibility study and reconnaissance, with CBI handling technical collaboration and exploration, while BBM secures approvals.

Stage II focuses on infrastructure development, where CBI will import and install coal wash plant machinery and construct underground mine infrastructure. BBM will allocate the site and provide technical support during construction.

In Stage III, the operations and logistics phase, CBI will manage underground mining and coal wash plant activities, with BBM creating the necessary logistics infrastructure.