Mining Weekly

Kangaroo Resources Limited  provides the following update on operations at its 99%-owned Mamahak Coal Mine in East Kalimantan, Indonesia for the month of December 2012. Activities at Mamahak during December focused purely on barging operations, with a total of 19,216 metric tonnes of coal transported to Bayan Resources’ Balikpapan Coal Terminal during the month, compared with 21,136 tonnes for November. This was due to the ongoing industrial dispute between the Company’s mining contractor, PT PPA, and their on-site personnel, which resulted in mining operations and coal production being temporarily suspended.

The Company has decided to make the most of the down-time in mining operations during this period by focusing on generating increased revenues via coal sales from the Mamahak operation, and reducing on-site and port coal stockpiles. Accordingly, at the end of December, total on-site and port coal stockpiles at Mamahak were reduced to ~133,000 tonnes of coal, compared with ~152,000 metric tonnes at the end of November. Under the Company’s current coal sales contract, all coal transported to the BCT is sold at an international coal market pricing index, and the Company will receive these sales revenues during the coming month.

Coal sales in November generated revenues of US$1,536,456. The Company is expecting production at MCM will continue to be affected during January, however KRL will continue to focus on barging operations during this period in order to realise coal revenues from the current coal stockpiles. The Company is continuing to review operational efficiencies, including mine plans and strip ratios, contractor performance, barging strategy and exploration practices during this period in order to counteract the impact of lower coal prices and current operational costs.

KRL is in discussions with PT PPA to review mining contract terms and conditions for the Mamahak mine-site as part of this review. With current mining contractor operations suspended, the Company will look to secure the longer term viability of the MCM operation moving into 2013 and will consider all measures as part of this process. KRL’s Managing Director, Mr Mark O’Keeffe, said: “While the continuing industrial action at Mamahak is disappointing, the Company has substantial stockpiles of coal available for transport that will deliver strong revenues for Kangaroo over the coming months. “We have moved swiftly and decisively to change our operating strategy in the short term to focus on barging operations in order to reduce these stockpiles and maximise revenues during this period. “In addition, we are actively reviewing our mining operations to ensure premium economic performance and efficiency for the Mamahak Coal Mine,” Mr O’Keeffe said.