PT Adaro Energy has agreed to pay $350 million for a 25% stake in BHP Billiton's Maruwai coal project in East and Central Kalimantan.
The decision by BHP Billiton, the world’s biggest mining group, to choose Adaro as its local partner to help develop Maruwai comes less than a year after it had scrapped the project.
BHP Billiton said in June 2009 that it would not go ahead with the first stage of the project because it did not fit with the company's long-term investment strategy, but later said it would sell a stake and opened up bidding.
A sharp recovery in coal prices following the downturn was one reason why BHP decided to restart the project.
Adaro, which is Indonesia's biggest coal producer by market value, owns a coal mine in Wara, South Barito, and has a coal hauling and port facility in the area. This means BHP will only have to construct a stockpile facility near Adaro’s port in Kelanis and make use of Adaro’s existing transporting facilities.
BHP Billiton will retain a 75% stake in the project, which has undeveloped metallurgical and thermal coal resources estimated at 774 million tonnes.
Maruwai is expected to start commercial production in 2014 and output is then seen reaching 6 million tonnes of both thermal and coking coal within five years. Thermal coal is used in power plants, while coking or metallurgical coal is sold to steel mills.
The project will need between $500 million and $1 billion to start producing at an annual capacity of 6 million tonnes. BHP plans to build a railway connecting the mine to the nearest barge-loading ports to help expand production. or