West Perth-based Straits Resources Ltd subsidiary Straits Asia Resources Ltd has entered into a deal to acquire two coal tenements north of its Sebuku Island operations for around $153.8 million, the company has announced.
West Perth-based Straits Resources Ltd subsidiary Straits Asia Resources Ltd has entered into a deal to acquire two coal tenements north of its Sebuku Island operations for around $153.8 million, the company has announced.
The full text of a company announcement is pasted below
SINGAPORE - 25 October 2007 -- Straits Asia Resources Limited ("Straits Asia", "the Group", SGX: SAR) is pleased to announce that it has entered into sale and purchase agreements to acquire mining, exploration and offtake rights to two coal mining areas to the north of its existing operations on Sebuku Island. Further details on the agreements were previously announced today.
This is the second potential thermal coal acquisition announced by Straits Asia since it was listed on the Singapore Exchange. On 27 September 2007, Straits Asia announced the signing of a Memorandum of Understanding to acquire a thermal coal mining business located in East Kalimantan, Indonesia.
The acquisition is subject to final due diligence and the consideration payable is US$25 million cash on completion. An additional contingent payment of approximately US$114 million will be made upon satisfaction of additional conditions which include obtaining relevant Indonesian government approval to re-classify certain areas within the mining concession, and obtaining relevant approvals to commence mining activities within the area The two areas contain coal deposits that lie in un-mined areas immediately adjoining the Group's own Coal Contract of Work ("CCOW"), and extending some 6 kilometres northwards.
Two independent reviews of the coal deposits utilising drilling conducted between 2003 and 2005 have identified approximate known resources of between 34 and 50 million tonnes.
Straits Asia will immediately embark on an extensive exploration programme over the next 12 months on the new areas in order to prove up the resource base to JORC standards.
Commenting on the acquisition, the Straits Asia CEO Mr Richard Ong said: "Having access to these deposits which are of similar quality to our Sebuku coal, is very beneficial to Straits Asia which has the infrastructure in place on Sebuku Island to exploit these deposits. It also helps to consolidate the Group's exclusive mining position on Sebuku Island, giving it significantly greater flexibility in the planning of its mining operations there."
Straits Asia has identified approximately 4 million tonnes of coal available for mining immediately. From the reports of two independent technical reviews, significant additional resources will become available upon satisfaction of conditions precedent relating to the US$114m contingent payment, and beyond this, the outcome of an extensive drilling program across both areas.
Commenting further Mr Ong said: "Moreover, we are also confident that the coal can be mined at a similar cost as our existing operation, which is one of the lowest in the world. I am sure we will be able to achieve a major jump in our resource and reserve base after we have conducted an intensive drilling program. This acquisition offers further tremendous potential for growth for our business beyond our goal of 6 million tonnes production in 2009."
