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Waratah Resources Continues Indonesian Coal Push

Waratah Resources (ASX:WGO) has updated on the progress of a proposed sale to an international coal trading company of trial 55,000 tonnes of thermal coal from South Kalimantan, Indonesia.

An initial total of 9,000 tonnes of coal has been delivered to the customer however commercial difficulties experienced by Waratah's supply partner have prevented delivery and implementation of the full amount.

The buyer's ship is concluding the current cargo with coal sourced from elsewhere, while Waratah is arranging an alternative buyer for its remaining 46,000 tonnes.

Waratah will incur penalties relating to shipping demurrage and replacement coal costs for the current customer expected to be around $200,000.

This agreement is Waratah's first transaction where the company has owned and on-sold the cargo, so some early teething problems can be expected.

Despite this hiccup, this initial trial supply could still result in a longer term supply agreements, in line with its goal of delivering cash flow and profit growth from its commodities trading arm.

Waratah has developed a strong business relationship over the past nine months with its Indonesian partner for supply of thermal coal from a long term producing mine.

Coal strategy

Waratah is focused on supplying thermal and coking coal from its Indonesian mining partners to its end user customers in China, India and Korea.

This includes a particular focus on long term off-take agreements.

In May, Waratah dispatched a 50,000 tonne cargo of thermal coal from Kalimantan to Shanghai, China.

This cargo arrived in June 2014 and represented confirmation of its strengthening commercial relationships with Indonesian partners, Indonesian coal producers and end users throughout Asia.

Potential further customer relationships are also being developed in Taiwan, India and South Korea.

The company has cash on hand totalling $860,637 as at 30 June 2014.

It also holds the Mekambo-Est Iron Ore Project in Gabon and Okanabora Iron Ore Project in the Republic of Congo.

The company has cash on hand totalling $860,637 as at 30 June 2014, and is modestly valued at under $5 million.

It also holds the Mekambo-Est Iron Ore Project in Gabon and Okanabora Iron Ore Project in the Republic of Congo.

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