Indonesia gives go signal for SAR's Sebuku coal exploration

The Minister of Forestry has formally issued the Izin Pinjam Pakai permits for the Northern Leases at the area.

In a statement, DMG Research said the "long awaited" permit will provide support for Straits Asia Resources to ramp up production for Sebuku.

Production volume in the area is factored at +37% for FY11 and +67% for FY12.

Exploration of the area will begin almost immediately, and capacity for the mine is currently more than 6m tonnes pa.

Sebuku coal is one of Indonesia’s highest grades of thermal coal, and trades at only ~5% discount to Newcastle benchmark prices, compared to Jembayan coal’s ~22% discount.

Overburden removal and coal mining is now scheduled to commence in ~3
months time.

"We believe the [granting of the permit] is a key catalyst that investors have been looking out for and expect some positive share price movement in the short term," DMG Research said.