Australia's HWE Bags Biggest Contract with $1.2 Billion Indonesian Coal Project

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The Australian mining and engineering company, Henry Walker Eltin Group Limited (ASX:HWE) (North Ryde, Australia) has been awarded a major $1.2 billion contract by PT Bumi Resources (JKX:BUMIao) (Jakarta, Indonesia) to develop mine infrastructure and supply coal mining and engineering services at the PT Kaltim Primas Coal (KPC) Bengalon project in Indonesia. This is the largest contract ever won by the company and forms the base for the long-term development of HWE's mining division.

Infrastructure work is required to commence operation of the mine, and mine development work will be undertaken using locally sourced equipment from HWE's fleet and local plant hire. Plant and equipment of about $120 million is needed for mining services to deliver the initial output target of six million tons per annum target.

Work will include development of the port area, construction of the haul road and support facilities including offices, workshops, accommodation and camp facilities.

The Bengalon coal resource is estimated to be in excess of 160 million tons of thermal coal. Before being sold to Bumi Resources KPC was owned by BP (LSE:BP) (London, UK) and Rio Tinto LSE:RIO,NYSE:RTP) (London, UK). KPC has appointed Glencore (Baar, Switzerland) as the marketing agent for the output in all markets except Japan, where Mitsubishi (TKX:4010) (Tokyo, Japan) will handle the market. HWE has retained first right to work with KPC on the development and expansion over the long term. The initial term of the contract is 10 years.

HWE CEO, Bruce James said, "KPC's high quality coal, low cost operations and proximity to key markets in Asia make the Bengalon project an attractive opportunity, facilitating a strong advantage over competitors in maintaining market share throughout commodity cycles." HWE hopes to generate a return on assets employed exceeding 20% over the life of the contract. Revenue for the year 2005 is estimated to be about $30 million flowed by $100 million in 2006 when production will have reached targeted levels.

The coal resource is contained in four pit shells some 25 kilometers north of KPC's existing operations at Sangatta. It has a cost advantage over other local producers being located relatively near to the coast. The mine will be a conventional 'truck and shovel' operation with coal trucked on a 25-kilometer haul road to the port crusher and load out facility.

The KPC project fits HWE's mining services strategy, which is to focus on longer life projects in less volatile commodities such as iron ore, coal and bauxite.

"We know the environment in Indonesia very well," said James." The company has operated in Indonesia since 1990 completing mining projects in Ponkok Labu, Busang, and Petangis, engineering and project management work at Freeport and civil works at Batu Hijau," he said.

HWE has annual revenues of $1.1 billion per annum which is generated largely from four core businesses: HWE Mining; HWE Civil; LSM Projects and Simon Engineering with work spread across more than 50 sites in Australia, New Zealand, Jamaica, Ghana and Indonesia and employing 3,000 people.

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