A recent heads of agreement with Bumi and Bumi subsidiary Arutmin Indonesia TBK (Arutmin) will enable WestSide and Arutmin to evaluate and develop CSM prospects within Arutmin’s coal production permits in the south-east corner of Kalimantan.

The latest HoA replicates the May 2007 agreement covering the sites operated by another Bumi subsidiary, Kaltim Prima Coal (KPC), in eastern Kalimantan.

WestSide chief executive Stephen Cullum said the new agreement with Bumi and Arutmin furthered WestSide’s international aspirations, and its relationship with Bumi, at a time when Indonesia was undertaking major projects to increase energy production to meet domestic demand growth.

However, the growing Indonesian energy market offered less advanced CSM development.

Bumi is a major shareholder and cornerstone investor in WestSide, holding 27.5% of the issued shares.

“This agreement represents a significant vote of confidence in WestSide as Arutmin is one of Indonesia’s major coal producing and exporting companies in its own right and is also one of the country’s longest-standing, private coal producers,” Cullum said.

He predicted CSM had a bright future in Indonesia and said the agreements secured a strong position for WestSide in the Asian nation.

Arutmin operates four mine sites in South Kalimantan, with the Mulia mine producing mainly sub-bituminous coal, while the Satui, Senakin and Batulicin mines produce predominately bituminous coal.

Arutmin exported about 16 million tonnes of coal in 2006, ranking it the third largest in Indonesia behind KPC, which is the world’s largest exporter, and PT Adaro.

Cullum said the Arutmin operations had different characteristics to those of KPC though.

“As is the case with KPC, there is a solid body of information available about shallow coals accessible by open-cut mining, but there is insufficient information available on the gas potential of the entire coal sequence.”

He said the new HoA mirrored WestSide’s agreement with KPC, committing it initially to the completion of a project definition study (PDS) of the CSM prospects, using data from Arutmin’s mining operations.

Ultimately, WestSide expected to hold a 50% interest in the Arutmin CSM operations, with each company in the joint venture contributing equally to development and production costs.

And, as with the KPC permits, the WestSide-Arutmin joint venture’s objective was to secure tenure over the gas reserves and use regional opportunities to market gas, subject to Indonesian legislation relevant to CSM production being finalised, Cullum said.

Any earlier production might be used internally within the mine operations, he added.

United States-based advisor Advanced Resources International (ARI), with CSM assessment experience in Indonesia, had been engaged to lead the PDS, Cullum said.

“We need to acquire some physical coal data before we can reach any firm conclusions,” Cullum cautioned.

“However, based on the available geological data, there are a number of immediately attractive areas for CSM exploration and appraisal which fit with the mining development plan.

“As we acquire additional information over the coming months, we will develop a clear picture of the size of this exciting opportunity.”

WestSide listed on the ASX last January after raising $A29.5 million through its initial public offering.