Geo Energy RI units sign mining services contract, coal mining cooperation

By Nellawati

SGX-listed Geo Energy Resources Limited said that the company?s subsidiary, PT Mitra Nasional Pratama (MNP) on 9 January 2013 entered into a mining services contract with PT Bumi Jaya Prima Etam (BJPE).

On the same day, the company?s subsidiary, PT Geo Mineral Trading (GMT) entered into a coal mining cooperation agreement with BJPE, the group said in a statement obtained on Wednesday.

Details of the statement are as follows.

BJPE holds a mine concession and mining license for production operation for an area of 739.9 hectares located in the Lebak Mantan and Lebak Cilong Villages, Muara Wis Subdistrict, Kutai Kartanegara Regency, East Kalimantan Province (the ?Concession Area?).

Mining Services Contract
Pursuant to the Mining Services Contract, MNP shall be exclusively appointed to provide mining services, comprising mainly overburden removal and coal haulage, in a specified area within the Concession Area, namely the Work Block. MNP shall receive a service fee of US$2.50 per bank cubic meter for overburden removal, and a service fee of US$0.20 per ton per kilometer of coal haulage. Additional fees shall be chargeable by MNP for services beyond the specified scope of work.

The appointment of MNP under the Mining Services Contract shall be effective from the date thereof and shall continue for as long as the mining activities in the specific Concession Area are economically and technically feasible as mutually agreed by MNP and BJPE.

Mining Cooperation Agreement
Pursuant to the Mining Cooperation Agreement, BJPE has agreed to sell and deliver the coal produced from the Work Block, exclusively to GMT. BJPE has undertaken exploratory activities and guaranteed that the potential coal contained in the Work Block is approximately 650,000 metric tons. The exploration results were made available to MNP, which has commenced drilling and boring works at the Work Block to ascertain the coal deposit.

In the event that the volume of coal produced from the Work Block amounts to less than 650,000 metric ton, BJPE will assign to GMT additional work blocks until the volume of coal produced reaches 650,000 metric tons.

The price of coal under the Mining Cooperation Agreement shall be US$71 per metric ton. In addition, GMT shall make an upfront payment of US$5 million to BJPE. The said payment will be made by GMT to BJPE if the following requirements have been met:
(a) BJPE has signed the Mining Services Contract with MNP; and
(b) MNP has mobilised heavy equipment and begun land clearing and overburden removal in the

Work Block, and during the period of 14 days from the commencement of work, there is no interruption or claim by any party against BJPE and/or MNP.

If the sale and purchase of coal under the Mining Cooperation Agreement cannot be performed for any reason, GMT shall have the right to terminate the Mining Cooperation Agreement and any money paid by GMT to BJPE shall be returned fully without any deduction whatsoever within 14 days of such termination.

The Mining Cooperation Agreement shall be effective from the date thereof until the production and sale of coal to GMT reaches 650,000 metric tons. In the event that the production of coal does not reach 650,000 metric tons within the next 12 months, GMT may terminate the Mining Cooperation Agreement.

Barring unforeseen circumstances and subject to execution risks, the Mining Services Contract and the Mining Cooperation Agreement are expected to have a positive impact on the net tangible assets per share and earnings per share of the Group for the current financial year ending 31 December 2013.

None of the Directors or controlling shareholders of Geo Energy Resources has any interest, direct or indirect, in the Mining Services Contract or the Mining Cooperation Agreement, other than through their shareholdings in the company (if any).

Editing by Reiner Simanjuntak