PERTH (miningweekly.com) – Coal producer Cokal has announced plans to raise A$4-million to assist in funding the Stage 2 development of its flagship Bumi Barito Mineral (BBM) project, in Indonesia, as Stage 1 production continues apace.

The miner on Wednesday reported that Stage 1 of the BBM asset was achieving anticipated production volumes, with the company hoping to establish a local market to sell its first stockpile of about 7 000 t of coal product.

Nonexecutive chairperson Domenic Martino told shareholders that the company had taken appropriate steps to properly showcase the properties of the coal product, and has been careful to ensure the sale price reflects the quality and uses of the coal.

“Initially, we would expect realised coal prices for the first few sales to receive a modest discount to international seaborne prices, due to local market conditions and as buyers become familiar with Cokal’s premium coal properties, and test the coal’s application,” Martino said.

However, the realised sales price was expected to increase significantly in future, particularly as Cokal was in the process of obtaining an export licence to enable coal sales into international markets, including Japan and China.

Meanwhile, the company was also focused on the next phase of growth at BBM, by advancing the pulverised coal injection (PCI) mining area.

“Once we get the BBM PCI project in line, production is expected to increase by 500 000 t/y and will be sold to overseas buyers,” Martino said.

He noted that while the cash flows from the Stage 1 BBM coal sales were anticipated to be sufficient to fund the BBM PCI development, the company had made the decision to raise an additional A$4-million to protect against contingencies and to ensure the development of BBM PCI was completed by December 2017, or January 2018.

The company has now entered into a convertible note agreement with a New York-based fund to raise the capital.