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Cokal has appointed Indonesia’s Harmoni Panca Utama to provide contract mining services at the Bumi Barito Mineral coal development project in the country’s Central Kalimantan province.

Cokal is aiming to develop the Bumi Barito project into an operating coal mine that produces export quality coking and pulverised coal injection (PCI) coal products within “an expedited timeframe”.

The agreement with Harmoni involves the provision of overburden services, including project management, mine planning, supervision, equipment, maintenance, labour and site infrastructure.

It will start within 90 days and last for a duration of five years.

Although the agreement value is not disclosed, Cokal will be funding the agreement with a $US20 million ($26 million) debt facility and the sale of coal from Bumi Barito.

Cokal stated that the costs payable were variable, depending on the mine production volume, Harmoni’s performance and external costs.

Cokal chairman Domenic Martino said the company had negotiated a strategically advantageous mining services contract, with mining costs linked to international coking coal prices.

“This mechanism will protect Cokal’s operating margin in lower coal price environments, whilst retaining margin enhancements for Cokal as coal prices rise,” he said.

Cokal has the right to terminate the agreement should Harmoni fail to achieve monthly production targets by 25 per cent or more for two consecutive months, or three months out of six consecutive months.

Should termination occur, Harmoni will be required to continue providing mining services until Cokal has selected a replacement contractor.

Harmoni is one of the largest mining services companies in Indonesia and has worked in some of the largest coal mines in the country.

The Bumi Barito project is Cokal’s most advanced project, covering a mining lease area of nearly 15,000 hectares.