How Will Cokal’s $15M Debt Boost Transform BBM Coal Production?

Strategic Funding to Accelerate Production

Cokal Limited (ASX, CKA) has announced a significant financial boost with the securing of US$15 million in strategic debt funding from long-term shareholder Eddie Chin, through International Commodity Trade Pte Ltd (ICT). This injection is earmarked to enhance metallurgical coal production at the Bumi Barito Mineral (BBM) mine in Central Kalimantan, Indonesia, where Cokal holds a 60% interest.

The funding will be directed towards capital expenditure aimed at expanding mining operations and upgrading transport infrastructure. These improvements are expected to drive operational efficiencies, lowering the cost per tonne of saleable metallurgical coal and positioning the company to better navigate the current market downturn.

Ending the Cratus Partnership

In a decisive move, Cokal has terminated all agreements with Cratus, a partner previously involved in coal marketing, transport infrastructure, and financing. The termination follows Cratus’s failure to meet agreed terms and deliver on commitments, which had become a significant obstacle to Cokal’s progress.

With Cratus out of the picture, Cokal is now exploring new logistics partnerships, including potential engagements with self-propelled barges to enhance coal transportation capabilities. This strategic repositioning aims to strengthen Cokal’s negotiating stance and operational flexibility.

Navigating Market Challenges

Despite ongoing global challenges in metallurgical coal prices and demand, Cokal recently completed a shipment of 7,500 metric tonnes to a local smelter, signaling a cautious resumption of domestic coal sales. While transportation from mine to port has slowed, operations continue steadily, reflecting the company’s commitment to maintaining momentum amid market uncertainty.

The debt facility arranged by ICT includes a US$1.5 million cash advance and US$13.5 million in bank loans secured by assets, with interest rates set at 10% and 8% per annum respectively. A service fee linked to coal sales volume is also part of the agreement. Importantly, the facility is non-dilutive, preserving shareholder value during a period of depressed coal prices.

Leadership Perspectives

Cokal’s Chairman, Domenic Martino, highlighted the strategic nature of the funding, emphasizing its role in completing critical infrastructure despite low coal prices. He noted that the termination of Cratus agreements places Cokal in a stronger position to negotiate logistics partnerships.

CEO Karan Bangur underscored ICT’s confidence in Cokal’s projects, particularly BBM and TBAR, and praised the non-dilutive funding approach as beneficial for existing shareholders. He also acknowledged ICT’s timely intervention following Cratus’s funding shortfalls, which was crucial for maintaining project development momentum.

Looking Ahead

With shareholder approval pending for guarantees related to the debt facility, Cokal is poised to advance infrastructure development, including coal hauling roads and loading facilities. The company’s strategic focus remains on scaling production volumes and capitalizing on an anticipated recovery in metallurgical coal prices.