Officials said the company had sole rights for 60 days to conduct due diligence processes at the property to determine the potential for a mining operation/production agreement.

Staff are already onsite for the due diligence phase, to commence mine plan drilling and prepare infrastructure agreements.

Should the deal come to fruition, Challenger will obtain full control of all coal production and marketing at the 100% KEM-owned project in the Murah Teweh district about 12km east of the region’s primary transport route the Barito River.

The multi-seam high-quality thermal project encompasses about 335 hectares (830 acres) with an operation production mining business license in place.

It also has existing infrastructure, such as a 12km haul road and loading jetty, which would aid an early production start, officials noted.

Once mined, coal from the property can be sold free-on-board via a barge at the jetty site or shipped further downstream to a stockpile, or direct loading on the mother vessel.

“This is a very important development for Challenger,” president and chief executive officer Ranjeet Sunder said.

“The KEM project gives us the potential to generate near-term cash flow that will provide funding for our Tabang project development and will enable us to capitalize on other high-quality opportunities, while minimizing dilution to our shareholders during these difficult capital markets.

“We view this project as having very low risk and relatively low capital requirements which are both key elements in our Indonesian coal strategy.”

Challenger, which has offices in Calgary, Singapore and Jakarta, has placed its exploration and operations focus on the Asian coal industry.