Coal deal cost unknown

  • Business
  • Tuesday, 13 Dec 2011

PETALING JAYA: Sanichi Technology Bhd has clarified that there were no pricing details available yet for the supply of coal that it had secured under a recently announced deal with Indonesian company CV Permata Al Zahra, and conceded it had also yet to finalise any purchase agreement or identify a buyer for the coal supply.

The ACE Market company also said that it had yet to undertake any due diligence on Permata, as the owners were known to Sanichi managing director Datuk Dr Jacky Pang. It also had a good reputation in the coal trading marketplace in Indonesia for meeting its commitments.

Due diligence, nevertheless, would be carried out in due course.

Sanichi had last Wednesday announced that it had reached an agreement with Permata for a committed supply of at least three million metric tonnes of coal per annum for two years.

The company on the same day also announced that it had entered into a collaboration framework agreement with FIRC Trade (M) Sdn Bhd for the purpose of forming an alliance to venture into the business of minerals mining and supply.

Trading in Sanichi was suspended the following day pending its reply to Bursa Malaysia. It resumed trading yesterday afternoon.

In its reply Sanichi said the pricing under its deal with Permata would only be provided as and when Sanichi makes a request for price on the back of order contracts from buyer organisations.

Sanichi said factors determining the pricing from Permata included grade, contract duration, logistics arrangement and payment terms. Based on market prices, however, the company expected the value of the three million metric tonnes of steam coal to be between US$280mil (RM885.8mil) and US$320mil.

“Sanichi's earnings will arise out of the trading margin made between the buy price from Permata and the sell price to buyers,” the company said, adding the grade of coal to be supplied would be as required by Sanichi's buyers.

Under the deal, the coal would come from Permata's own mines as well as other contract miners in the region. Permata has an estimated reserve of approximately 70 million metric tonnes of steam coal. Details on the extraction rate for its mines, nevertheless, were not available.

“At this stage, Sanichi is on the main, reliant on FIRC to provide the expertise for seeking buyers to market the coal too,” Sanichi said.

“Our target market is the power generation companies in China,” it added.

Separately, Sanichi said it was no longer a GN3 (Guidance Note 3) company, following the completion of a private placement exercise involving 16.35 million new ordinary shares of the company last Monday, which lifted the company's shareholders' equity to more than 50% of the company's issued and paid-up capital.

(GN3 is triggered when a company reports poor and adverse financial condition and level of operations.)

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