The thermal coal project covers five exploration licences close to coal terminal infrastructure and PT Bumi Resources’ Artumin coal mine, which was formerly owned by BHP Billiton.

Under the JV, Orpheus will spend $US750,000 on exploration and a mine feasibility study targeting a quick start to coal production.

Mega Coal will receive $US50 per tonne of measured resources defined in the project, plus $US5 million cash and a 15% shareholding of Orpheus after the initial public offering of the Coalworks spin-off.

Orpheus will make another payment of $US5 million to Mega Coal once the milestone of 20 million tonnes of measured resources is achieved.

There is a contingency where Orpheus’ resource payments will be capped at $US50 million in the event the measured resources exceed 100Mt.

On the successful completion of the JV terms, Orpheus will earn half the share capital of companies PT Prima and PT Pelita, which own the Kintap project tenements and are associated with Mega Coal.

Orpheus entered a strategic alliance with Mega Coal last year. Their first Indonesian JV was struck over the B26 project in East Kalimantan which has started trial mining and won an offtake agreement for 25,000 tonnes.

Coalworks will keep its shareholders informed of the listing process and timetable for Orpheus.

Back in December, the wholly owned subsidiary was expected to make its debut on the Australian Securities Exchange in the March quarter.

The fast development of Indonesian coal projects is often aided by the ability to barge coal along rivers.

Coalworks shares closed down 2.4% to 80c yesterday.