SINGAPORE (Oct 20): Geo Energy Resources, an Indonesia-focused coal miner, is expanding downstream in an effort to develop recurring income.

Its subsidiary PT Sumber Bara Jaya (SBJ) has signed a cooperation agreement with PT Bandar Laut Biru (BLB) to manage and operate a port terminal in South Kalimantan for 15 years, the Mainboard-listed company said in a statement this morning.

Besides managing port operations, SBJ will also build a new conveyor belt, crusher and related facilities at the terminal.

The new conveyor belt will run about 800m into the Java Sea, enabling large barges to be loaded directly and not be subject to tidal conditions, according to Geo Energy.

With the cooperation agreement, Geo Energy said it will now be able to increase its revenue stream through the handling of coal from third-party miners while it concurrently takes care of BLB’s existing customers.

It can also expect to lower its own logistics and operating costs and tap BLB’s network for coal trading and marketing of third-party coal.

The port terminal can handle up to 4.8 million tonnes of coal yearly. With the new conveyor belt, expected to be built within two years, overall annual capacity will increase to 22.8 million tonnes.

“As a coal port operator, Geo Energy will slowly transition from being a coal miner and mining services provider to being an integrated coal mining group with upstream and downstream capabilities,” Charles Antonny Melati, the company’s executive chairman, said in the statement.

Users of the South Kalimantan port terminal currently pay service fees of more than IDR65,000 (US$5.38) a tonne, according to Geo Energy.

“With a fixed income fee payable to BLB of IDR30,000 per metric tonne and after operational costs, we believe this will result in a positive contribution to our group’s financial performance,” said Melati.

SBJ will make an advance payment of IDR36 billion ($3.8 million) to BLB, with the first amount of IDR26 billion due within five working days from the date of the cooperation agreement and the balance to be paid 1½ months later.

Geo Energy shares closed at 24.5 cents, up 6.5%, last Friday.