KILLARA Resources has entered into a binding agreement with experienced Indonesian mining contractor Berkah Ciwi Lestari Kaltim (BCLK), for the further development and coal production from its Borneo Emas Hitam (BEH) coal project in East Kalimantan. Production is expected to begin during the current quarter.

BCLK started deployed heavy equipment and personnel to the site in late December for an immediate focus on overburden removal to expose coal for extraction. During the second week of January BCLK, Killara and the local community held a traditional ceremony to mark the commencement of mining and followed with land clearing.

BEH concession is divided into three blocks - Eastern, Central and Western. Killara’s initial priority is Eastern Block based on outcrop and drilling data. This area has three short-term production targets (pits 4, 6 and 8) which have been subject to land compensation.

An additional 28 core samples from the undeveloped area in Eastern Block have been sent to PT Geoservices’ Balikpapan laboratory for analysis. A total of 78 samples from drilling and outcrops have been submitted for analysis and results to date have confirmed a direct shipping thermal coal product with high CV and low ash, but with varying high sulphur levels.

Killara has completed the Eastern Block exploration and mining will start there. Mine designs and the mining sequence for the operation in pits 4, 6 and 8 are ready and BCLK will commence mining based on the designs from Killara on the compensated areas. From October to December BCLK visited BEH on numerous occasions to verify the geological data.

Management is engaged in discussions with coal buyers while a non-technical team is engaged in the IUP renewal process with a well advanced application with regional authorities.

Killara also has an option to acquire a direct interest in a coal concession in Central Kalimantan owned by PT Pagun Taka (PT). This concession is in a prospective area known to host coal and Killara is planning to undertake extensive field work to determine its economic value for shareholders.

A field reconnaissance program has been completed focusing on validating geological information provided by the vendor which included field mapping, laboratory analysis and associated reports. Killara identified coal from three geological formations at PT - Montalat, Berai and Warukin. The Montalat and Warukin formations are subject to mining in an adjoining concession and throughout Central Kalimantan.

Field mapping identified 22 coal outcrops with true thickness averaging 0.61 and ranging up to 1.45 metres. Thirteen outcrops were sampled and submitted to PT Geoservices, and results confirmed a direct shipping thermal coal with very low ash and low sulphur.

Killara is completing an economic assessment, the result of which will determine the nature of ongoing work.