Cokal converts loans to royalty payments

PERTH (miningweekly.com) – Coal developer Cokal has entered into a royalty agreement with its senior lenders to convert its $13.8-million outstanding loans to a production royalty.

The ASX-listed company on Tuesday told shareholders that from the start of commercial production, lender Platinum Group would be entitled to a yearly royalty on coal sold from Cokal’s share of production from the Bumi Barito Mineral project (BBM) and the PT Tambang Benua Alam Raya (TBAR) projects.

The royalty will equate to 1% of Cokal’s share of the realised selling price, up to a maximum royalty of $40-million, and Cokal and its related parties will have the right to buy out the royalty at any time for $40-million less the amount paid on the royalty at that time.

The royalty obligations will be filed with the original tenement with the Indonesian authorities and secured by charges over Cokal’s interest in the BBM and TBAR projects.

The agreement was subject to lender due diligence, as well as shareholder approval, project funding, commercial production, and the grant of security for the royalty.

“This is a momentous time for Cokal, as we turn another corner, and get closer to production,” said nonexecutive chairperson Domenic Martino.

“The timing couldn’t be better as the metallurgical coal industry has proved to be quite buoyant, and it appears that the future pricing will remain at levels that will provide a significant profit margin to Cokal’s Indonesian coal sales.”

Cokal is currently considering a start-up project, at a lower capital cost, with the aim to provide positive cash flow to fund the larger BBM two-million-tonne-a-year coking coal project.