Oracle Coalfields (LON:ORCP) shares leapt ahead as its coal price petition for the Thar thermal power project in Pakistan was admitted.
The company has petitioned for an US$76.48/tonne average price over the thirty year period of the lease.
This was based on production of 4mln coal tonne per annum: capital costs (including financing costs), of US$879mln; and a 70:30 debt equity split.
Chinese institutions Sinosure, the Chinese Export Credit Corporation and other financial institutions will provide US$615mln, with US$264mln to be sought in new equity.
Shahrukh Khan, Oracle’s chief executive, said: "The admission of our coal price by the Thar Coal and Energy Board, Government of Sindh, is an important milestone for the company and represents the latest step towards our goal of developing a producing mine capable of supplying indigenous coal.”
The next step is for the local energy board, the TCEB, to determine the feasibility stage coal price that will set an initial electricity tariff for the power plant at the project.
Once the engineering contract for the mine is finalised, the coal price will be re-determined in a further petition.
Further coal price petitions will be submitted to TCEB periodically through the lifetime of the project as costs are updated. The electricity tariff will be similarly adjusted.
The pricing regime in Pakistan is a cost-plus arrangement where coal miners in the Thar Desert are allowed to make a return of 20% in dollar terms.
Oracle added is is close to selecting a mining sub-contractor, which will be followed by the signing of EPC term-sheets with SEPCO, the Shangdong Electric Power Corporation of China, for both the mine and the adjacent power plant.
Discussions on financing with Sinosure are ongoing.
Shares jumped 22% to 1.62p.