Manila (Platts)--20Feb2013/542 am EST/1042 GMT

Australia-listed Killara Resources expects to begin production, as scheduled, in the second half of this year at its Bengkulu thermal coal project on Indonesia's Sumatra island, despite a temporary halt in exploration work, a company executive told Platts Wednesday.

Killara executive director Matthew Driscoll said exploration work at the Bengkulu project was suspended in January due to the rainy season, but the company expects to resume work in H1 March, and start commercial production within six to eight months.

The company began exploration in January at the project, which covers 2,000 hectares in the Bengkulu Forearc Basin. Killara has an 85% stake in the project, with the rest held by Indonesian companies.

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Driscoll said coal at the Begkulu project will have typical calorific values of 5,000-6,200 kcal/kg gross air dried, and have low ash and sulfur content. Benkulu is estimated to produce 2-10 million mt of coal over an expected mine life of five to 10 years, he said.

Separately, Killara said Tuesday in a filing with the Australian Securities Exchange that it had temporarily ceased exploration at a second Indonesian coal project, Nunukan, in East Kalimantan province.

In December 2012, the company began a six-month exploration and due diligence project at Nunukan as part of its bid to acquire an 80% equity interest from the project's Indonesian owners.

But a "clean & clear" certification to explore and mine for coal in one of the three licenses under the Nunukan project has expired, prompting Killara to temporarily abandon exploration work, Driscoll said.

He said Killara was in talks with the project owners, which he declined to identify, to get the permit reissued by Indonesian authorities, following which the company will resume exploration work.

The three Nunukan licenses cover 15,103 hectares of the largely unexplored Tarakan Basin.

--Cecilia Quiambao, Cecilia_quiambao@platts.com

--Edited by Deepa Vijiyasingam, deepa_vijiyasingam@platts.com

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