Kalimantan Gold to sell E. Kalimantan project to Tiger Realm

London-listed firm Kalimantan Gold Corporation Limited has entered into a binding letter of intent (LoI) allowing Australian firm Tigers Realm Minerals PTY Ltd. to earn up to a 70 percent interest in the former's Jelai gold project.

Tiger may get the stake after meeting certain project expenditure obligations and completing a bankable feasibility study (BFS).

Under the terms of the LoI, which is subject to due diligence and is to be replaced by a definitive option agreement not later than Feb. 4, 2011, Tigers can incrementally earn up to a 70 percent interest in the Jelai project by spending US$6 million by June 30, 2014, including $2 million by June 30, 2012, the company announced last week.

If Tigers doesn't complete the BFS by that date, its interest earned in Jelai will convert to a royalty capped at two times its investment in the Jelai project.

Tigers will continue to sole fund until the partners approve development of the project. Thereafter both parties will be responsible for its share of funding. Tigers will use its best commercial endeavors to arrange project finance for up to a maximum of 75% of the company's funding requirements for the project, it said.

The Jelai project in East Kalimantan consists of 12 prospects. One of them, the Mewet prospect, is in advanced exploration with 126 holes drilled over nearly 14,000 meters confirming the potential to yield a major epithermal gold deposit, comparable in scale to the Vera Nancy mine in Australia, which has produced 2.3 million ounces to date. It is a low-sulphidation epithermal precious metal system consisting of at least seven major veins and numerous subsidiary veins with a cumulative strike length of more than five kilometres.

Drilling to date has discovered at least five potential ore shoots within the restricted strike length that has been explored. Interpretation of mineral textures in the veins and comparison with models for low-sulphidation epithermal systems suggests that the current level of exposure is near the top of the precious metal zone. Previous drilling on the Mewet shoot indicates that the vein becomes thicker with depth and that the mineralization extends over at least 200 metres vertically. (denny)