Cokal (ASX: $CKA) announces strategic agreement for underground coal production

Cokal Limited (ASX: $CKA) has signed a binding agreement with PT Cipta Bersama Indonesia (CBI) to develop an underground mining operation at Pit 1 of the BBM Metallurgical Coal Mine, to produce a PCI coal product within 18 months, at zero cost to Cokal. This strategic agreement represents a significant windfall for Cokal, as there were no plans to develop any underground operations at BBM Pit 1 within the foreseeable future. CBI will be the contractor in charge of the underground mine development and operations.

Executive commentary on the strategic agreement

This agreement is another major milestone in BBM's development and production ramp-up. Importantly, prior to the Agreement with CBI, BBM did not anticipate any underground mine development for at least another decade. This Agreement brings that production forward and is entirely in addition to the current targets of coal production from the open pit operations at BBM. This will add additional cashflow and enhanced value to Cokal. In addition, the additional coal volumes will utilize and enhance the value of the extensive coal transport logistics chain that Cokal has developed and is expanding.

Summary of the strategic agreement and outlook

Cokal's strategic agreement with PT Cipta Bersama Indonesia to develop underground coal production at the BBM Metallurgical Coal Mine without any capital outlay is a significant development. The agreement not only accelerates production but also adds cashflow and enhanced value to Cokal. The company anticipates that the development of the underground project to first coal production will require approximately 18 months. This initiative underscores Cokal's commitment to enhancing efficiency and production at BBM, ensuring it remains at the forefront of the metallurgical coal industry. The company is confident that these enhancements will significantly contribute to its growth and sustainability.