Kangaroo will pay $US2 million cash and plans to spend $8 million to bring the “GPK” project to production under its deal with concession owner PT Graha Panca Karsa.
The GPK project has total JORC resources of 248 million tonnes including 14Mt indicated and 107Mt inferred.
Of this resource, 141Mt is at depths of less than 60m and consequently Kangaroo expects a low strip ratio.
The project is progressing towards an exploitation licence to allow for initial production by December.
“GPK has the potential to be rapidly advanced to development for modest capital expenditure,” Kangaroo said.
The coal quality indicated low sulfur and ash levels, with an average energy value of 5425 kilocalories per kilogram on an air dried basis.
The project is 15km from the Mahakam River, allowing for the development of port facilities.
Kangaroo aims to complete site works, and organise equipment and contractor needs for planned production of 25,000 tonnes per month by December.
The Australia-listed company also seeks to start a drilling program to upgrade resources to the measured category, paving the way for a mine plan for future ramp-up.
Infrastructure works will lift production to 1Mt per annum by mid-2010, 2Mtpa in 2011 and 4Mtpa in 2012.
Lastly, Kangaroo plans to finalise coal offtake agreements with Indonesian utility company PT Perusahaan Listrik Negara.
The company said its Indonesian partners had significant experience in managing and starting coal operations in East Kalimantan, and it would work closely with them over the next three months to kick off production.
Kangaroo has committed $US5 million of expenditure through a separate deed of termination and release agreement with Kal Energy, its subsidiary Thatcher Mining and PT Graha Panca Karsa.
The agreement gives Kangaroo the resources reports prepared by Kal Energy and other information relating to the project.
Kangaroo has already paid $US100,000, with $2.4 million due in 30 days and another $2.5 million due in 60 days.
On the funding front, Kangaroo has raised $A2.59 million for working capital via a placement of 36.97 million shares at 7c per share to sophisticated and institutional investors.
Kangaroo chairman Mark O’Keeffe said the GPK project was a fantastic acquisition for the company.
“It represents a rare opportunity for Kangaroo to capitalise on a near-term, high-quality production asset with excellent exposure to the thermal coal market,” he said.
“The GPK coal project complements Kangaroo’s investment on the BP and MBK high-quality coal projects, which will position the company as a significant coal player in the Indonesian market.
“The company will continue to leverage its strong in-country partners and advisers to become a thermal coal producer by December 2009 and continue to access further exciting coal projects in the region.”
O’Keeffe said Kangaroo would also move to develop its Mt Ruby iron ore project in northeast Queensland in the coming months.
The explorer holds 12 tenements in the state covering 2955 square kilometres and prospective for gold, tin, tungsten, copper and lead turf.
Shares in Kangaroo closed up 53% to 15c yesterday.