Churchill Mining PLC (CHL: AIM) announced the completion of the feasibility study for its flagship project, the 75 percent held East Kutai coal project (EKCP)  in Indonesia,  confirming a preferred 20 million tonne per annum production rate. The company anticipates project construction work at EKCP to start in 2010 and take two years to complete.

The EKCP has a 2.481 billion tonne JORC resource of which 956 million tonnes has been classified as a JORC probable reserve.

Its wholly owned subsidiary PT Indonesia Coal Development has been selected as a prospective thermal coal supplier to Indonesia's PT Cirebon Electric Power, which is building a 660 MegaWatt power plant in West Java which is due to start operations in 2011.

Churchill has put the project's infrastructure items - mine stockyard, overland conveyor, port/ship loader and power station - out to tender and this process is well advanced. To date the bids received have been well below predicted costs due to the resurgence in global manufacturing and engineering capabilities following the global financial downturn.

It anticipates completion of its tender process and final evaluation of the bids by the end of January 2010. It will then be in a position to further inform investors of the expected capital cost and life-of-mine financial returns.

It recently began mining a bulk sample at site for testing at the Australian Coal Industry Research Laboratory in  Queensland, Australia, in order for Churchill to advise potential customers of the coal's handling abilities, combustion, boiler performance and other quality characteristics.

Company representatives also recently visited 17 companies on India's East Coast to discuss the project and potential off-take agreements. “Churchill came away highly encouraged by the growth profile of future Indian coal demand - it was established that India will need a minimum of 100 million tonnes per annum of new EKCP-styled coal to meet expected future energy needs,” the company said.

The feasibility study envisages that the EKCP coal will be transported from the mine, ultimately made up of three open pits, using a 160 kilometre overland conveyor system comprising eight flights at a speed of 5 metres per second, powered by a coal-fired plant using EKCP coal.

Currently four international groups are tendering to build the conveyor in conjunction with more than 40 component companies. Final tenders to build the 75MW power station and associated transmission lines have also recently been received.

Coal conveyed from the mine will be delivered to a coastal port location which Churchill has identified as the optimum deepwater site to acommodate Cape class ships. The conveyor will feed to a port stockpile with an underground feeder reclaiming system. This ship loader will be built to handle ship loading up to 6,000 tonnes per hour. 

Churchill is now undertaking final bathymetric and wave, wind and tide studies for the future port facility. Tenders for the port piling and coal loader have been received.

CEO Paul Mazak commented: "We ... look forward to announcing the associated results of our economic modelling early next year.”

"Churchill is still evaluating how best to generate value for shareholders. Our options include the sale of the project or company, the development of EKCP with a joint venture partner or the financing and implementation of the EKCP by Churchill itself. We continue to have discussions with a number of interested parties and the company hopes to be position next year to announce the results from these negotiations," he added.  

At the end of September it confirmed it had received three separate and unconnected non-binding approaches, all of which at various stages. Two of these approaches related to the possible acquisition of specific projects within Churchill, and the third related to a possible offer for the company as a whole. At the same time it did, however, deny press speculation linking it to BHP Billiton PLC (ASX: BHP; LSE: BLT).

Churchill last week appointed Pala Investments AG as strategic advisor to assess the company's current structure with a view towards increasing its operational and capital-raising flexibility. Pala is focused on the mining and natural resources sector.  It offers strategic advice and guidance, corporate structuring assistance and financial solutions to assist client companies in meeting their operational and financial requirements, it said.

In addition to appointing Pala, Churchill has engaged PricewaterhouseCoopers Indonesia to assist with assessing certain aspects of the company's current structure from a tax and financial perspective, including the impact of the implementation of the new Mining Law in Indonesia.

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