Straits Asia stands firm on claims regarding Jembayan failure

Extending help to Straits Asia are MSN Loss Management and Cunningham & Lindsey (C&L) as independent loss assessors.

Straits Asia Resource Limited is having on-going discussions with its Insurers following the decline of claims from its Insurers, a Straits Asia report said on Monday.

The claim is in regards to the the failure in October 2009 after continuous rains caused significant erosion along Mahakam River foreshore. As a consequence there was a failure of the foundation structure under the Jembayan Line 2 coal loader and a decision was made to dismantle the Line 2 conveyor structure and jetty.

Straits Asia engaged MSN to assist with the quantification of the insurance claim. The value assessed in respect of the property and equipment is approximately US$15m.

An international loss adjusting firm, C&L was appointed as independent loss assessors by the Insurers to review the claim. The review by C&L has been underway since their appointment.

Straits Asia has been notified by Insurers that the insurance claim in respect of the foundation failure has been declined. This notification included an opinion from Aseli, Aryany & Partners, an Indonesian law firm, indicating that the Insurers have grounds to avoid the policy.

Straits Asia has received advice that no such grounds exist. Accordingly, Straits Asia maintains that the claims are valid and has appointed an international law firm to advise on a vigorous pursuit of the claims.

The Line 1 coal loader facility, which has a nominal capacity of 5.5Mtpa, was not affected by the problems at Line 2 and its continued operation, together with supplementary coal loading measures, have performed as expected. Accordingly, Straits Asia confirms that its target for coal sales from Jembayan mine for 2010 remains unchanged at 8.0Mt to 8.5Mt.