Cape Range acquires Indo coal project

Burswood-based Cape Range Wireless Ltd will move to full control of Metro Consolidated Pte Ltd, which holds rights to mine an Indonesian coal project.

Cape Range today announced an alteration of an agreement released in June, where Cape originally agreed to acquire a 20 per cent stake in Metro for $400,000 cash and the issue of 65 million shares.

Today, Cape said it will acquire a 100 per cent interest in Metro for no additional consideration fees, except for the payment of $5 million worth of Cape shares when a resource of 10 million tonnes is reached.

A further scrip payment of $5 million will also be issued when 1mt of coal is produced and sold from the project.

Metro has entered a sub-contract with PT Batubesar Mega Nusantara to conduct mining activities on an Indonesian coal prospect.

Below is the full announcement:

Revised agreement with Metro Consolidated Resources Pte Ltd for the benefit of CAG shareholders Cape Range Wireless Limited (CAG or Company) advises that the contract previously entered into with Metro Consolidated [s] Pte Ltd (Metro) has been revised in favour of CAG, such that CAG is now the 100% owner of Metro (up from its prior 20% interest).

Metro owns 100% of the shares in PT Metro Consolidated Resources (MCR), (95% as a direct holding and 5% through a trust arrangement) a Foreign Investment Company (Penanaman Modal Asing), which has entered into a sub-contract with PT Batubesar Mega Nusantara (BMN) to conduct mining activities on a coal prospect covered by Coal Contract of Work PKP2B - Area KW.0080 (CCOW), issued by the Government of Indonesia.

PT Senamas Energindo Mulia (the holder of CCOW) has appointed BMN as its mining contractor and BMN's rights have been sub-contracted to MCR in return for a royalty payment by MCR. Investors are referred to the announcement made by the Company on 16 June 2008 for further details on the project in general.

Under the revised agreement with Metro, CAG will not pay any additional consideration for the balance of the shares in Metro (80%) and there will not be any initial share consideration. i.e. CAG will complete the acquisition of 100% of Metro immediately.

In addition, CAG will be obliged to issue the vendors with:

(a) $5m worth of shares at a deemed value of 3c per share if a JORC compliant resource (measured) of at least 10m tonnes of coal is defined on the project; and

(b) $5m worth of shares at a deemed value of 3c per share if 1m tonnes of coal is produced and sold from the project.

In revising the terms of the contract in this manner, CAG has reduced the consideration payable and acquired 100% of Metro immediately i.e. $400k cash in total for 100% of Metro.

This revised structure will allow CAG to capitalize on the existing opportunities that Metro has brought to the table as well as open the door for other opportunities, of which the board is currently evaluating.

Site Activities Update

The Company is pleased to report that it has been informed by Metro that they have successfully concluded negotiations with land owners and villagers within the exploitation concession and that all of the necessary documents have been secured. This includes having the necessary permits duly notarized by the village heads. However, there have been a number of delays experienced by Metro. The causes of these delays range from the holy month of Ramadan in Indonesia to a change in focus area by the contractor.

An initial review of the first area within the exploitation concession by Metro's geological team determined that the area was likely to be economically unproductive. In response, the contractor has stopped equipment mobilisation to this area and Metro has not contributed any additional funds for drilling and boring of this area within the exploitation concession. Metro and the contractors have now shifted their focus to new areas within the exploitation concession. The contractors visited these areas on the exploitation concession last week with a representative of Metro, Mr Anbu Nagalingam. Three areas of interest were identified. CAG is advised that the contractor is now satisfied with the current coal bearing locations and have given the go ahead for commencement of mining activities in this area.

The mining contractor has visited the sites (Fig. 01) and is satisfied with the first location chosen (PIT 01) for extraction to commence. Survey results from Metro show that coal seams in the new area of focus can be economically exploited. This new focus area is only ±500 m to the usable haul way and the contractor has indicated that it will be commencing mining operations shortly after the Islamic New Year (Oct 6th). The contractor has therefore provided Metro with an undertaking that re-mobilisation of equipment will now commence.

Metro and the contractor now expect that the equipment will arrive at the site around 10 to 14 October 2008, with working commencing around 16 to 21 October. The necessary personnel have been engaged, which includes the contractor's site manager and engineers. These personnel have been interviewed and approved by Metro. Their role will be to design and draw the mine plan, including the base camp to house them. This should commence simultaneously with the mobilisation of equipment to the site. Once work has commenced at the site, the first production of coal is expected within approximately 6 to 8 weeks time.

The 2 remaining pits identified by Metro in the Sanggai Mountain area also have good indications of coal in economically mineable quantities. Metro and the contractor are currently finalising plans to work on all three pits simultaneously. This will require the addition of further machinery and manpower. While the delays are disappointing, they are a common occurrence when undertaking mining activities and the Board is pleased that a new defined timeline for commencement of production has been put in place.

Additional opportunities

The revised terms of the agreement with Metro will allow the Company to consider other potential acquisitions opportunities in the area without the overhang of significant dilution to any potential vendors. This is a significant step forward for the Company in being able to evaluate other projects.

In this regard, the Board, which includes its new member Mr Tony Milton, have identified and are currently evaluating a number of exciting opportunities.

Existing Technology Assets

The Company continues to undertake its due diligence review on the Company's telecommunications technology known as the Arcadian Technology (Arcadian Technology or the Technology) and the investment in PeoplesTel Telecommunication (PT Investment). [The Arcadian Technology is predominantly held in 2 entities - Cape Range Wireless Inc a US Corporation and Cape Range Wireless Malaysia Sdn Bhd, a Malaysian entity].

To preserve value and competitiveness where possible the Company has continued to maintain in good standing the key patents and IP that underpin the technology. The review to-date has shown that there a number of constraints that potentially limit the Company's ability to realise material value to stakeholders - including the limited commercial success of the technology, the significant time that has passed since the technology was first conceptualised and the speed at which the market has become increasingly competitive with new technologies and the state of the foreign entities in which the technology is part held.

However, the Company has still been able to enter discussions with three different parties that have shown interest in the Technology and is expected to further those discussions with at least two of the parties. Various options are being considered including licensing and divestment (outright purchase or royalty streams). The Company will update shareholders as things progress. In December 2005 the Company invested US$100,000 for an interest in PeoplesTel (PT Investment).

The PT investment secures a $136,986 limited recourse loan from Farrant Limited. The Company continues to review the viability of the investment and its strategic importance to the Company moving forward. In the event that the Company deems there is commercial value in the investment the Company has the right to payout the secured creditor for PeoplesTel.