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Mon 23 Mar 2009 11:06 AM

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UAE mining firm wins $600m rail contract in Indonesia

Railway will allow Ras Al Khaimah Minerals and Metals to transport the coal it mines.

Ras Al Khaimah Minerals and Metals Investments (RMMI) has been awarded a licence to build a $600m railway network in Indonesia, enabling it to transport coal extracted from mining operations in the Asian country.

RMMI will next month begin looking for a technical partner in the contracting and railway operating business to build and operate the 125km railway track in East Kalimantan province, Madhu Koneru, managing director of the firm said in an interview.

The Regency of East Kutai in Indonesia formally issued the licence for the procurement, construction and operation of the special purpose rail network.

RMMI would start talks soon with a number of international banks including International Finance Corporation (IFC), the private sector arm of the World Bank, and the Asian Development Bank (ADB) about the possibility of financing the project, he said.

RMMI, which holds total global assets of around $4bn, is a mining firm set up by RAK's government in 2005 as a joint venture with RAK Investment Authority (RAKIA) and the Trimex Group.  

RAK needs the coal to fuel a power station it is building as it looks to meet a shortage of 200 megawatts of power in the emirate.

 The power station should be built within two years, Koneru said.

RMMI plans to start road transportation of three million tonnes of coal from the first quarter of 2010, with transportation by rail beginning by the first quarter of 2012 once the railway is built, said Koneru.

The mining operations would have the potential for production of 15m metric tonnes per annum of coal by 2012 and 30m by 2020.

Only 30 to 50 percent of the coal would be for RAK and the rest would be exported to markets in India and Japan.

“We will look at the railway track as a separate business unit to make it feasible and profitable as a business,” Koneru said. 

“The track can carry up to 30m tonnes of cargo so will we be working with other neighbouring mines to allow them to use the existing track to leverage the volume and reduce the costs of transportation.”

The railway project would create between 2,000 to 2,500 jobs in Indonesia, he said.

Engineering firm ARUP had completed a engineering feasibility study for the railway line that will connect the district of Muara Wahau to the East Kutai coast in East Kalimantan.

The total investment in the Asian country by RAK was around $1bn, with the railway track valued at up to $600m, with the remaining $400m invested by RAK over the next five years, Koneru said.

RMMI was collaborating with the East Kutai government to commence the initial phase of work on a jetty with mounted conveyors to load coal onto ships for international transportation.

RMMI was also looking to buy a copper smelter in either India, Thailand or Vietnam to add to current assets in Congo and Armenia.

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