Challenger exercises option to purchase DPK Coal Project

Calgary-based firm Challenger Deep Resources Corp. announced on Friday that its wholly owned subsidiary, Challenger Deep (Indonesia) Ltd. has exercised an option to purchase an additional coal project in East Kalimantan.

In exercising this option, Challenger has entered into a Conditional Sales and Purchase Agreement (CSPA) with the shareholders of PT Dua Putri Kutor (PT DPK) for the purchase of 100% of the issued and outstanding securities of PT DPK.

PT DPK is a privately-held Indonesian company that holds the coal exploration rights to a property which is located in the Sangatta area in East Kalimantan, known as the DPK Project. PT DPK has no other assets and has conducted no business other than holding its interest in the coal property.

Challenger's decision to exercise the option to purchase follows a successful program of initial due diligence conducted on the property. The due diligence program involved field mapping, surveying and limited outcrop sampling. The results of this preliminary program has encouraged Challenger to move to the CSPA stage for the property, the company said.

DPK Project
The DPK Project is an IUP Exploration stage property with an area of approximately 12,830 hectares and is located approximately 200km North of Samarinda. There are 2 active large coal mining operations (PT Kaltim Prima Coal and PT Perkasa Inaka Kerta) in the area. The DPK project area immediately adjoins the mining activities of PT Kaltima Prima Coal

Terms of the DPK Project CSPA
The DPK Project CSPA includes a payment of Rp 500 million (US$ = Rp.9,000) upon execution and payment of the remaining Rp17 billion over the next 24 months, in three scheduled payments. Timing of the final payment to be made is based on the date of the issuance of an IUP Operation Production permit by the relevant Indonesian Governmental authority. The CSPA also provides that upon Challenger's production and sale of coal from the property, it will grant and pay to the vendors of the shares of PT DPK, a royalty of USD $1.50 per ton.

Jambi Area MOU Extension
Challenger also announces that the previously reported MOUs signed in respect of the PT MBT and PT MP properties in Jambi, Sumatra have been extended to February 1, 2012, in order to allow further geological and legal diligence to proceed. (romel)