Challenger exercises option to acquire Pelangi project

Challenger Deep Resources Corp., a Canadian coal miner, announces that it has exercised its option to purchase an additional coal project in East Kalimantan, Indonesia. It exercised the option through its wholly owned subsidiary, PT Bestindo Energy.

In exercising this option, Bestindo has entered into a conditional sales and purchase agreement (CSPA) with the shareholders of PT Pelangi Kertanegara for the purchase of 100% of the issued and outstanding securities of PT Pelangi, the company said.

PT Pelangi holds the coal exploration rights to the property which is located in the Mahakam river basin in East Kalimantan, known as the Pelangi Project. PT Pelangi has no other assets and has conducted no business other than holding their interest in the Pelangi Project.

Challenger's decision to exercise the option to purchase follows a successful program of initial due diligence conducted on the assets. The due diligence program involved field mapping, surveying and limited sampling.

?The results of this preliminary program have encouraged Challenger to move to the CSPA stage for the property,? it said.

The acquisition of the Pelangi project is subject to approval of the TSX Venture Exchange.

The Pelangi project is an IUP application stage property with an area of approximately 4,000 hectares located approximately 10km south of Challenger's Tabang Coal Project. The project covers the Balikpapan formation which is prospective for coal in this area. The Balikpapan formation is known to host large resources of coal in the general Tabang area.

A program of advanced due diligence is still continuing and includes reconnaissance mapping, further sampling and analysis.

The property lies on the Balikpapan Formation, which typically has coal in the 4,000 - 6,000 Kcal/Kg ADB CV range.

To date exploration covering 20% of the area has discovered 26 coal outcrops indicating multiple seams with thicknesses varying from 0.25 to 2.6 meters. These are minimum thicknesses in most cases as the full exposures of the outcrops have not been established.

The IUP Exploration Permit application is in progress and exploration drilling of the property will commence upon receipt of the permit.

The acquisition of the Pelangi project forms part of Challenger's strategy of establishing a significant land position in the Tabang-Kembang Janggut area. Having multiple properties in the Tabang Coal District will permit coal quality blending to maximize the export market potential for production.

Under the CSPA, Challenger will make a payment of CAD$33,300 upon execution and payment of the remaining CAD$1.78 million over the next approximately 18 months, in three scheduled payments. The CSPA also provides that upon Bestindo's production and sale of coal from the property, it will grant and pay to the vendors of the shares of PT Pelangi, a royalty of USD $1.50 per ton. (romel)