SINGAPORE (Sept 23): Geo Energy Resources has entered into a conditional share purchase agreement to acquire PT Titan Global Energy (TGE), and an effective interest of 51% each in two producing mines, PT Bara Anugrah Sejahtera (BAS) and PT Banjarsari Pribumi (BP), for US$25 million ($34 million).
The proposed acquisition will see Geo Energy having access to and control over the mining operations and coal deposits located in South Sumatra – one of the three largest regions of Indonesian coal resources – and a diversification to higher calorific value coal reserves and production.
In a bourse filing on Monday, the company says the proposed acquisition is in line with its business strategy to expand its business operations, geographical diversification, and increase its coal reserves and production levels.
Based on a 2018 report, BAS and BP have an estimated coal tonnage of 50 million tonnes and 39 million tonnes, respectively. The proposed acquisition will effectively increase Geo Energy’s existing coal reserves to approximately 122 million tonnes.
The coal located at both mines, which have been in production since 2012, have low average ash content of less than 6% and low average sulphur content of 0.3%. Such coal is mainly used in power plants to generate electricity.
BAS and BP has a contract with PT Titan Infra Energy (TIE) to supply coal to PT Perusahaan Listrik Negara (Persero), a state-owned electricity company to fulfil its domestic market obligation (“DMO”) requirements. BAS and BP’s DMO sales for the financial half year ended June, 30 2019, was 1.8 million tonnes.
Last year, the two mines produced a combined 3.8 million tonnes of coal. Geo Energy says it is looking to increasing the combined coal production at the mines upon successful completion of the proposed acquisition.
The proposed acquisition will be funded by existing cash of the group.
“The Indonesian coal industry is rather fragmented with only a few big producers and many small players that own coal mines and coal mine concessions (mainly in Sumatra and Kalimantan),” says Charles Antonny Melati, executive chairman of Geo Energy. “We are excited that Geo Energy will potentially own six coal mines in Indonesia with a potential projected annual production of more than 15 million tonnes of coal a year.”
“The proposed acquisition will bring together an experienced partner in TIE for Geo as we expand our business,” he adds.
Shares in Geo Energy closed flat at 14.8 cents on Friday.
