The group holds interests in respect of two stone deposits and two coal mining concessions, all of which are located in East Kalimantan in Indonesia.
The coal mining concessions comprise a high calorific value deposit near Kota Bangun and the lower grade Liburdinding concession in the southern part of east Kalimantan. The rights in respect of the Muser coal concession have been allowed to lapse as the group concluded that the prospect for this concession were insufficient to justify the costs of extending the Muser licences.
Stone quarrying is classified as a mining activity for Indonesian licensing purposes and is subject to the same regulatory regime as coal mining. The group's stone interests are therefore managed in conjuction with the coal interests through an Indonesian subsidiary company, PT KCC Resources Indonesia, which is 95% owned by the company's UK subsidiary KCC Resources Limited and 5% ownded by local partners.
The operating licence required to establish a simple quarrying and crushing operation on the andesite stone concession was obtained in 2014. Ancillary permissions for upgrading of the existing access road to the concession to support heavy duty trucks are being secured. Crushed stone will be transferred from the concession site by truck to a stockpile on the REA Kaltim estates from which onward deliveries will be made to the agricultural operations and third party buyers. The agricultural operations can utilise significant quantities of crushed stone for their building and infrastructure construction programmes and indications are encouraging that there will also be good third party demand for crushed stone for road building and use as a concrete aggregate.
The directors decided to limit, in 2012, further capital commitment to the coal operations and to concentrate on maximising recoveries of the amounts already invested. Discussions have recently been concluded on novation of a project agreement signed in 2013 with a third party relating to the development and operation of the Kota Bangun concession. The novation will bring in a second third party to fund resumption of mining. This will permit dewatering of the concession area to begin shortly with coal extraction operations expected to resume shortly thereafter. Under the novated agreement, the group would receive a steady cash inflow based upon prevailing coal prices but with an agreed floor.
Previous negotiations with another third party in relation to the Liburdinding concession proved abortive but the group is continuing to hold discussion reagrding this concession with several potentially interested parties. The group's aim is either to divest the concession in its entirety or to conclude arrangements similar to those applicable to the Kota Bangun concession with the group guaranteed a minimum revenue from the concession.