Cokal Secures US$7 Million Coal Prepayment Facility to Boost Indonesian Operations
Cokal Limited has formalised a US$7 million coal prepayment and offtake facility with Cratus Group, marking a pivotal step in accelerating coal production and infrastructure development in Central Kalimantan, Indonesia.
- US$7 million Coal Prepayment and Offtake Facility executed with Cratus Group
- Initial tranche of US$3 million received to support coal production
- Strategic partnership includes US$20 million total investment, with US$13 million into infrastructure joint venture
- Facility structured over 30 months with quarterly coal deliveries and repayment
- Expected cost reductions and enhanced market access through Cratus expertise
Strategic Partnership Takes Shape
Cokal Limited (ASX: CKA) has reached a significant milestone by executing formal documentation for a US$7 million Coal Prepayment and Offtake Facility with Cratus Group, a bulk commodities and investment firm with deep expertise in coal markets. This facility represents the first tangible outcome of the strategic partnership announced in November 2024, designed to unlock value from Cokal’s coal assets in Central Kalimantan, Indonesia.
The initial tranche of US$3 million, received in January 2025, is the first of three tranches that will be advanced over the coming months. This capital injection is intended to accelerate coal production and development activities at Cokal’s PT Bumi Barito Mineral (BBM) mine, underpinning the company’s operational and financial objectives.
Facility Structure and Terms
The facility is structured as a prepayment and offtake agreement, where Cratus advances funds to Cokal in exchange for future coal deliveries over a 30-month term. Coal deliveries are scheduled quarterly, starting with 15,000 tonnes in Q1 2025 and ramping up to 300,000 tonnes by Q4 2026. Repayment to Cratus is made at a rate of US$7 per tonne of the contracted coal quantity, regardless of actual delivery, with facility fees accruing at 10% per annum on outstanding balances.
Security for the facility is provided by BBM’s coal inventory, and Cokal has guaranteed BBM’s obligations, reflecting the company’s commitment to meeting its contractual commitments. The facility replaces a previously announced coal prepay arrangement, streamlining funding and offtake under one comprehensive agreement.
Broader Investment and Infrastructure Plans
Beyond the US$7 million facility directly supporting coal production, Cratus plans to invest an additional US$13 million into an Infrastructure Joint Venture with Cokal. This JV aims to enhance coal transport infrastructure capacity and efficiency, a critical factor in reducing delivery costs and improving market access. The partnership leverages Cratus’s extensive network and operational expertise, which includes coal marketing, logistics, and financing solutions.
Cokal’s Chairman Domenic Martino highlighted the strategic importance of this partnership, noting that it provides the funding, expertise, and infrastructure necessary to meet production and sales targets efficiently. CEO Karan Bangur emphasised that infrastructure upgrades will substantially reduce costs per tonne, helping Cokal achieve a cash flow positive position even amid challenging market conditions.
Market Implications and Outlook
This facility and partnership position Cokal to accelerate its transition from development to production, potentially increasing its footprint in the metallurgical coal sector. The involvement of Cratus, with its strong ties to Asian coal markets, particularly China, offers Cokal enhanced marketing reach and financial flexibility. However, the success of this arrangement depends on Cokal’s ability to meet coal delivery schedules and market demand, as well as navigate commodity price volatility.
Investors will be watching closely how the partnership unfolds operationally and financially over the next quarters, especially the ramp-up in coal production volumes and the realisation of cost efficiencies from infrastructure improvements.
Bottom Line?
Cokal’s new funding and strategic alliance with Cratus set the stage for accelerated growth, but execution risks remain as coal volumes and infrastructure upgrades scale.
Questions in the middle?
- How will coal market conditions and pricing affect Cokal’s repayment and profitability under the facility?
- What are the specific infrastructure projects planned under the joint venture, and their timelines?
- How will Cratus’s marketing capabilities translate into actual sales volumes and contract stability?
