JAKARTA, March 16 (Reuters) - Canadian mining firm Kalimantan Gold Corp. is in talks with an Indian power plant on equity participation and a supply deal in a coal project in Indonesia's East Kalimantan, a company official said on Monday.
Kalimantan Gold (KLG.V), a junior mining firm listed on Canada's TSX Venture Exchange and the AIM Exchange, said in November last year it had signed an option with a local firm PT Indobara Pratama to bring its coal deposits into production and acquire up to an 80 percent stake.
The firm has an exclusive 90-day option on due diligence as well as for a drilling programme during this period, Kalimantan Gold said in its statement.
PT Indobara owns a coal mine in East Kalimantan which has potential deposits of between 55-60 million tonnes of 5,400 kcal/kg of coal, Kalimantan Gold said in December.
"We are inviting them (the Indian power firm) because for this type of coal you need long term and certainty. It's not the type of coal you can sell for spot market," said Mansur Geiger, Kalimantan Gold's vice president for exploration.
"They will own shares and they will be responsible for the coal off-take," Geiger told reporters, adding the mine is expected to start commercial production in September.
He did not name the Indian power plant or give the number of shares it might take up in the project.
The coal mine is expected to produce 1 million tonnes in the first year, gradually increasing to 5 million tonnes within 4-5 years, he said.
Indonesia' energy ministry expects the country to produce about 230 million tonnes of coal this year, unchanged from 2008 on expected slowing demand.
But industry officials said the country's coal output may reach 250-260 million tonnes as coal consumption by India and China would help shore up demand.[ID:nDEL409393]
India's demand for coal is growing by around 8-9 percent a year, outpacing production that is growing by 6 percent as the power sector has not been as badly hit by the credit crunch.
The government expects Indonesia's coal output to increase to 250 million tonnes in 2010 and 321 million tonnes by 2015.
(Reporting by Fitri Wulandari; Editing by Ed Davies)