MG Mining bags P8-B coal supply deal with Kepco subsidiary

?MG Mining and Energy Corp., a subsidiary of Sultan Mining and Energy Development Corp. (SMEDC), signed today an P8-billion coal supply contract with Korea South-East Power Co., a subsidiary of Korea Electric Power Co. (KEPCO).

Under the 10-year coal supply contract, MG Mining will deliver 320,000 tons of coal to KSPC?s 200 megawatt base load power plant in Naga, Cebu once it begins commercial operations sometime next year.

?We are very pleased to have signed this contract as a Filipino corporation since this will help in easing the country?s dependence on imported energy sources as well as help in conserving foreign currency reserves,? said SMEDC vice chairman and senior adviser Rufino Bomasang.

Bomasang said the purchase by KSPC of local coal was in line with the implementation of President Gloria Macapagal-Arroyo?s goal of promoting energy independence.

Michael Morales, SMEDC vice president for marketing said KSPC has approved the quality of MG Mining?s coal as having met its specifications.

He said that MG Mining?s coal has higher calorific value than the KSPC requirement in the contract, as reflected in its ongoing coal deliveries to its existing customers since 2007.

MG Mining expects to earn bonuses, as provided by the supply contract, because of the higher heating value.

Initially, MG Mining will be sourcing the coal from its mine in Bislig, Surigao del Sur but also plans to offer, for KSPC?s approval, coal from the much bigger Daguma coal reserves in Sultan Kudarat and South Cotabato once the mine there comes into full production next year.

The company is confident that even the Daguma coal can meet KSPC requirement.

The Department of Energy has approved the development and production of coal in the Daguma deposit.

Independent validation of the coal reserves indicate that the Bislig mine contains about 62 million tons of coal resources and about 30 million mt of minable reserves.

The company has blocked about 426 mt of coal from Daguma mine.

Also, initial exploration and drilling has also blocked 55 million mt of minable reserves in 526 hectares of the 7,000-hectare coal property.

The company expects to identify more minable reserves as it does more detailed work in the rest of the Daguma deposit.

The KSPC contract requires between 3.2 million to 6.4 mt of minable reserve to complete the coal deliveries, over the 10-year period.

Planning, preparation and development of the mines for the supply of coal to KSPC will begin this month, Morales said.

In 2008, the Bislig run-of-the-mine production rose to 200,000 tons of coal.

SMEDC, on the other hand, said it was still keen on pursuing its plans for an initial public offering when market conditions improved.

Related terms: coal, commercial, contract, electricity, energy, exploration, korea, local, market, marketing, mining, philippines, power plant, president, property, public offering