COAL MINER Geo Energy Resources is expanding its services downstream by managing and operating a port terminal in South Kalimantan, Indonesia, for 15 years.
The SGX-listed company said yesterday that its subsidiary, PT Sumber Bara Jaya (“SBJ”), has signed a cooperation agreement with PT Bandar Laut Biru (“BLB”) whereby BLB appoints SBJ to provide services including (i) managing and operating the jetty as well as all facilities and infrastructure at the port terminal; (ii) construction of a new conveyor belt, crusher and related facilities; and (iii) providing periodic maintenance and repair of those facilities.
Geo Energy, as a result, will be able to increase its revenue stream through the handling of coal from third party coal miners while concurrently taking on BLB’s existing portfolio of customers.
In addition, there would be "more certainty over SDJ’s logistics schedule" and at the same time lower its own logistical and operational expenses by reducing its reliance on external port operators.
With the terminal under its charge, Geo Energy expects to widen its network and enhance its opportunities for coal trading and marketing of coal from third parties.
Loading of coal onto a barge at the port terminal which Geo Energy will operate in Bunati Sub-district, Angsana District, Tanah Bumbu Regency, South Kalimantan. Photo: Geo Energy
The new conveyor belt that Geo Energy will construct will be ready within the next two years, running 800 meters into the Java Sea, hence allowing large barges to be loaded directly and not be subject to tidal conditions.
On completion of the conveyor belt, the strategically located port terminal, which has an existing maximum capacity for handling 4.8 million tonnes of coal per annum, will have its capacity increased to 22.8 million tonnes per annum. This is an increase of 3.75 times.
Charles Melati, executive chairman of Geo Energy. NextInsight file photo.
Giving an idea of the financials of the port management service, Mr Charles Antonny Melati, Executive Chairman of Geo Energy, said, “We understand that the current port service fee paid by customers are in excess of IDR65,000 (approx.US$5.38
) per metric tonne. With a fixed income fee payable to BLB of IDR30,000 (approx.US$2.44
) per metric tonne and after operational costs, we believe this will result in a positive contribution to our Group’s financial performance.
"This will be further magnified with the completion of the conveyor belt for the existing loading facility.
"As a coal port operator, Geo Energy will slowly transition from being a coal miner and mining services provider to being an integrated coal mining group with upstream and downstream capabilities.”
In August 2014, Geo Energy had announced the completion of the acquisition of the SDJ concession, spanning a total area of approximately 235.5 hectares in South Kalimantan.
This increased the Group’s coal reserves by more than 4 fold, from approximately 11 million tonnes to more than 50 million tonnes. Geo Energy is now preparing to ramp up production as coal from the SDJ concession, with an average calorific value of 4,038 kcal/kg (GAR), is valued for its versatility by power plants in China, India and Indonesia.Recent story: @ GEO ENERGY'S AGM: "Low Coal Prices Present Opportunity For M&A"