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A company listed on the Singapore Exchange (SGX), Sakari Resources Limited, is planning to strengthen its coal mining business in Indonesia by acquiring several mining business licenses (IUPs).

In an announcement published on its website and submitted to the SGX, Sakari said it had signed a Heads of Agreement (HoA) — a non-binding document of partnership agreement — to acquire a 100 percent interest across six IUPs in Indonesia. The company said the IUPs covered an area of more than 29,000 hectares, located about 30 kilometers to the north of its existing site, Jembayan Mine in East Kalimantan.

“Under the HoA, Sakari will undertake an exploration program and due diligence review and, if the results from these activities prove satisfactory, the acquisition will proceed to completion. Drilling on the properties will start in August 2012 with preliminary results expected toward the end of the year,” Sakari said in the file.

The company has made an initial refundable cash deposit of US$2 million. Sakari will pay an additional $2 million in cash plus an equity component, which will be determined by reference to the results from the drilling programs and the number of IUPs acquired, if the agreement moves to completion.

“The total equity consideration is capped at $60 million in value, should Sakari decide to acquire an interest in all the IUPs,” it said.

Sakari has become one of Indonesia’s leading thermal coal exporters. In 2007, the company acquired Jembayan mine, which has an area of around 12,000 hectares in northwest Balikpapan, East Kalimantan. Since the acquisition, Sakari has managed to increase Jembayan’s production volume to almost 10 million metric tons a year from 4 million metric tons.

Jembayan produces a medium quality sub-bituminous coal which is low in moisture and sulphur. Its coal resources and reserves total 604 million metric tons and 142 million metric tons respectively.

In addition to Jembayan Mine, Sakari also has a concession area of about 18,000 hectares located on the tiny and remote island of Sebuku in South Kalimantan, where one of the largest deposits of high quality bituminous coal in Southeast Asia has been discovered. Sakari said the site has a production volume of around 4.5 to 5 million metric tons per year.

According to its financial report, Sakari sold 4.71 million metric tons of coal during the January to June period, down about 8 percent compared to 5.16 million metric tons in the same period last year. Production volume reached 4.71 million metric tons during the period, a drop of 13 percent from 5.45 million metric tons year on year.

Sebuku produced 1.19 million metric tons in the first half of the year, while Jembayan produced 3.52 million metric tons.