EQUATORIAL COAL LIMITED Audio Webcast

EQUATORIAL COAL LIMITED (EQX)

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EQUATORIAL COAL LIMITED (EQX) Events

Company (Stock Code)	Date/Time	Event	Timezone: Australia/Sydney
EQUATORIAL COAL LIMITED (EQX)	Thu, 27 Nov 2008 12:00pm	EQX - 2008 AGM Summary - Mr Jim Dracopoulos, Managing Director
EQUATORIAL COAL LIMITED (EQX)	Mon, 18 Aug 2008 3:15pm	EQX - Positive Cashflow Outlook for Equatorial Coal - Mr Jim Dracopoulos, Managing Director
EQUATORIAL COAL LIMITED (EQX)	Thu, 26 Nov 2009 11:00am	Annual General Meeting The Celtic Club, 48 Ord St, West Perth WA
EQUATORIAL COAL LIMITED (EQX)	Sun, 15 Mar 2009 11:00pm	Interim Results
EQUATORIAL COAL LIMITED (EQX)	Wed, 26 Nov 2008 4:00pm 02:00pm Australia/Perth	Annual General Meeting The University Club of Western Australia, Hackett Drive, Crawley WA
EQUATORIAL COAL LIMITED (EQX)	Fri, 30 Nov 2007 9:00am	Annual General Meeting Level 34, Exchange Plaza, 2 The Esplanade Perth WA 6000
EQUATORIAL COAL LIMITED (EQX)	Fri, 31 Aug 2007	Full Year Results
EQUATORIAL COAL LIMITED (EQX)	Tue, 27 Feb 2007 11:00pm	Interim Results
EQUATORIAL COAL LIMITED (EQX)	Tue, 27 Feb 2007 11:00pm	Full Year Results
EQUATORIAL COAL LIMITED (EQX)	Tue, 28 Nov 2006 10:00am	Annual General Meeting Level 34, Exchange Plaza, 2 The Esplanade Perth WA
EQUATORIAL COAL LIMITED (EQX)	Wed, 13 Sep 2006	Full Year Results
EQUATORIAL COAL LIMITED (EQX)	Wed, 15 Mar 2006 11:00pm	Interim Results
EQUATORIAL COAL LIMITED (EQX)	Mon, 28 Nov 2005 1:00pm 01:00pm Australia/Melbourne	Annual General Meeting 401 Collins St, Melbourne, VIC
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EQUATORIAL COAL LIMITED (EQX)

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INTERVIEW WITH JIM DRACOPOULOS, MANAGING DIRECTOR OF EQUATORIAL COAL LIMITED (EQX)

“Positive Cashflow Outlook for Equatorial Coal”

http://www.brr.com.au/event/49525

 

MONDAY, AUGUST 18, 2008, 3:15 PM.

 

            BRR    Today Boardroom Radio welcomes Mr. Jim Dracopoulos, the Managing Director of Equatorial Coal. Jim, thanks for your time.

10        EQX    Thanks, Cameron.

 

            BRR    As this is Equatorial Coal’s first time on Boardroom Radio, let us start with some background. EQX is a former biotech that was recently re-listed. Who are the new shareholders and how is the Company structured?

15        EQX    Well, we have got about $164 million shares on issue and a market capital of around $50 million probably. We have got some ongoing support from our old biotech shareholders, but we are also seeing very strong interest from new shareholders attracted to the coal industry. I think we have got a pretty good mix of investors. We have got some serious players out of America and they

20                    came through with some strong support (inaudible) (0:00:41) brokers and advisers.

 

            BRR    Can you give us some flavour on your background, please, Jim.

            EQX    My background is a mix of finance, commercial and corporate management

25                    experience in the resources industry as well as management of mining operations, and that is the experience over the last 16 years in Indonesia. Until about 18 months ago, I was with Straits Resources and I was lucky enough to hold quite a wide variety of roles with Straits, and it was with them that I became versed in the Indonesian coal industry.

30

            BRR    Jim, as you said, you focus on coal. Where are your projects based, please?

            EQX    Our immediate focus is on our Alam Duta project in South Kalimantan, and so far, all of our prospect there is under exploration or review. I mean, we are on coal-producing regions of South and East Kalimantan where we are very

35                    close to export services and have very feasible logistics intrinsic coal transport options. The logistics side is fairly (inaudible) (0:01:31) in project economics.

 

            BRR    Jim, the Company has signed three MOUs with Indonesian company PT.

40                    Mega Coal Indomine. Probably the most significant at this stage relates to the Alam Duta project in Indonesia. What can you tell us about the project?

            EQX    That is the project that is getting most of our attention on the ground because that is where we are going to get our first coal production. We have only been on the ground there since about June, but we are on track to produce our first

45                    coal in September. Our mining contractors began construction and development very well especially when you consider the heavy rain that has been recorded in South Kalimantan during June and July. So we are very happy that we have not had to push our development schedule back. It is only a small project and we expect to produce about a million tonnes a year for about four years probably, and while operating them on, we will begin exploration on several nearby tenements with the view to probably replicating the Alam Duta model.

 

5          BRR    Jim, you anticipate the production from Alam Duta should make your project cash flow positive by the end of calendar year 2008.

            EQX    Yes, certainly. Even with quite modest production and (inaudible) (0:02:33) for the fourth quarter of this year, the level of interest and indicated pricing for our product gives me pretty good confidence that the project will be

10                    contributing positively to Equatorial’s cash position by the end of the year. We expect that the project will be generating free cash flow of around $20 per metric tonne in the coming months.

 

            BRR    The South African and Australian coal sectors have suffered infrastructure

15                    constraints. Is that something that is being replicated in Indonesia?

            EQX    Not really. Indonesian coal industry is quite different from what we see in South Africa and Australia in that Indonesian producers do not rely to a certain extent on the fixed transportation and coal-handling systems such as lab assistance and ship loading ports. You can find the project in the vicinity

20                    of Indonesia’s cape, but that is great. But there also pretty big areas in the interior of Kalimantan that are prospective for coal and a lot of out there can be serviced by one or other of the major river systems running through the coast. These rivers carry a significant amount of coal from the mining operators to the coast where typically transhipment operations take place

25                    using mobile shiploads and some fixed port facilities. What that means is small operators can open up new mines without having to worry about major CAPEX for transport systems and coal-handling facilities or about competing for access to existing rails that can go to port facilities.

 

30        BRR    Jim, what other advantages do you see from operating in Indonesia?

            EQX    Well, Indonesia has recently become the world’s largest exporter of thermal coal, overtaking Australia. Some of the reasons, I suppose, that producers find Indonesia attractive would be obviously the first one is geological prospectivity in Kalimantan and Sumatra and the fact that the Company

35                    recognizes the economic benefits that resources industries bring and so they are very receptive to new developments. Also there is a niche support available in the outlying areas such as readily available and affordable labour and contracting equipment and other services in the mining industry. When you add to that the competitive price advantage that Indonesia has in

40                    servicing Asian customers as compared to, say, Australia, you have got most of the ingredients to a very robust coal industry.

 

            BRR    Alam Duta holds thermal coal which is experiencing record prices at the moment. For our listeners, Jim, that are not familiar with the coal market,

45                    what is thermal coal primarily used for and why is the market outlook so bullish?

            EQX    Thermal coal is mainly used for the generation of electricity in (inaudible) (0:05:00) places. It is also used in certain industries such as the cement industry. There is a lot of support from the view that it is going to be the continued development and electrification of the heavily populated Asian nations such as China, India and even Indonesia that is going to drive the demand for thermal coal further up within the next decade. Also, there are going to appear many realistic opportunities for coal for supporting the

5                      existing and growing populations in Europe or the US. So it has just made bullish views on thermal coal pricing pretty well founded.

 

            BRR    A point you raised in your company presentation recently was interesting, saying that after massive organization process in developing nations

10                    subsides, the demand for energy and in particular coal continues to grow. So while iron ore demand might have a finite life, at least to the current price levels, coal looks good long term.

            EQX    Well, simplistically, iron ore or steel is needed when economy is growing, but the coal or electricity is needed just for the world’s growing population to

15                    survive. It gives us an additional edge in terms of demand for our products.

 

            BRR    Looking at another of your MOUs, you have a majority interest in the East Kalimantan project. Could you provide us with some background in the area, please?

20        EQX    Yes, sure. East Kalimantan generates around 60% of Indonesian’s thermal coal exports and it is very heavily populated in terms of both very small and quite large operators. Our current focus in that region is in the Central and Southern part of East Kalimantan and all those current explorations prospects are very near the coast. In fact, we concentrate around the industrial centre of

25                    Balikpapan which gives us various types of logistics and support if we do indeed identify sufficient coal to warrant development of an operation on one of our prospect areas.

 

            BRR    Jim, finally, South Kalimantan is a project that is subject of another MOU with

30                    Mega Coal. What are your terms of the arrangement?

            EQX    That account is a bit different to East Kalimantan at least in relation to our specific prospect areas. In the South Kalimantan area, the coal is specifically of a slightly low quantity but the quality is very thick, and so potential for identifying a significant amount of coal in a small area with a pretty modest

35                    exploration program is very, very good. Our MOU with Mega Coal in South Kalimantan is probably going to be about 50 million tonnes of coal and we have negotiated an acquisition cost in terms of acquiring a 51% interest in the net profit of an efficient coal production of around about a dollar a tonne of coal in the ground. We think this is a pretty good deal and with strong

40                    potential for success and about a target mark of 50 million tonnes, I could imagine a situation whereby we might have two or three operations coming on line over the next year or two (inaudible) (0:07:38) while we continue to build an (inaudible) (0:07:40) coal hole within the area and pursue the 50 million tonne target.

45

            BRR    Jim, thank you very much for your time and updating us on Equatorial Coal. We appreciate it and we look forward to following your developments.

            EQX    My pleasure, Cameron. I look forward to speaking to you again sometime.

            BRR    If our listeners would like to ask Jim a question about Equatorial Coal or their prospects, they can do so by the facility on the webcast. We will then forward that to Jim for a time he can answer at a later stage.

 

INTERVIEW CONCLUDED

 

 

 

 

Contact brr@brr.com.au for more information

 

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