Churchill Mining will supply Indonesian power utility company PT Ridlatama Bangun Mandiri (PT RBM) with thermal coal for 30 years to feed two 30 megawatt power stations it is building in Kalimantan, Indonesia.

PT RBM is an independent power producer owned 55% by PT Indonesia Power, a wholly owned subsidiary of Indonesia's state owned electricity utility PLN, with the remainder owned by private investors.

Construction of PT RBM's new power stations will start at the beginning of 2008 and the plants are expected to be on-stream by mid-2010. The first-stage plants will be built at a cost of about US$60 million at Muara-Marah, a provincial town about 15km east of Churchill's East Kutai coal discovery.

Under the Heads of Agreement, which will convert into a final coal-purchase agreement once a JORC-compliant mining reserve of a minimum of 30 million tonnes has been defined, Churchill will supply about 840,000 tonnes of coal per year for 30 years based upon a 5% discount to the prevailing market price.

Test work on coal discovered by Churchill at its East Kutai project has found it to have an average calorific value of 5260 kilocalories per kilogram. Investigations made by Churchill show that similar type coals are trading for about US$28 per tonne.

Churchill Mining's joint managing director Paul Mazak says the agreement is a major step forward in the company's plan to secure early-stage cash flow. "We are viewing the relationship with PT Ridlatama Bangun Mandari as a first step. We are aware that they are looking to building other power stations in Kalimantan, certainly much bigger than these first two plants, and discussions are ongoing on how Churchill can be involved."