Kangaroo in $277m Pakar coal project acquisition deal

Coal producer Kangaroo Resources Limited (KRL) announced on Wednesday that it has signed an agreement for a major coal acquisition that will see it establish a key strategic relationship with one of Indonesia?s largest coal mining companies and ultimately join the ranks of the country?s largest coal producers.

KRL has agreed to acquire the world-scale Pakar thermal coal project in East Kalimantan from Indonesian Exchange-listed coal mining group PT Bayan Resources Tbk for an equivalent total value of $277 million, all payable in KRL shares. As a result of the transaction, which is subject to due diligence, shareholder and regulatory approval, Bayan will emerge with an approximate 57% stake in KRL, the company said in statement.

?Bayan to become KRL?s majority shareholder with an approximately 57% stake following completion of the transaction, which includes the injection of a further US$18 million into KRL to further boost its working capital,? it said.

This agreement with Bayan is subject to due diligence, which will be carried out over the next 30 days, and KRL obtaining shareholder and regulatory approval.

The Pakar project is a large, low-rank thermal coal project located in East Kalimantan that has been developed over the past four years with initial exploration carried out, which delineated the resource and substantially constructed infrastructure to support the commencement of mining operations. This infrastructure includes roads, port facility, crushers, conveyors, mine camp and other key essentials required to move Pakar into production in the near term.

Pakar is a large-scale, substantially developed and integrated coal mining operation with total coal resources of 3.8 billion tons, inclusive of total coal reserves of 116 million tons (both estimated in accordance with the JORC Code ).

The Pakar project is expected to start production next year, it said.

Together with KRL?s other Indonesian coal assets ? including the 100%-owned Mamahak Coking Coal Project, which is currently producing, the Tanur Jaya Thermal Coal Project and the GPK Thermal Coal Project. This acquisition will reposition KRL as a world-scale Indonesian coal producer, it said.

KRL has been earning a 49% interest in the Tanur Jaya concession (one of the nine concessions within the Pakar Project) over the past 12 months and this position will now be incorporated into the overall 99% interest that KRL is acquiring in the Pakar Project.

KRL also said that it has completed the commercial review of its GPK thermal coal project in East Kalimantan and, as a result of the association with Bayan, the company intends to keep GPK within KRL and will look to resume coal operations at this project in 2011.

The company has also signed a memorandum of understanding (MoU) with Bayan to immediately take operational control of KRL?s Indonesian projects prior to the completion of the above transaction.

With a market capitalization of US$4.5 billion, total coal resources of over 1 billion tonnes and total coal reserves of approximately 500 million tonnes spanning eight mining concessions in East and South Kalimantan, Bayan is one of the dominant companies in the Indonesian coal market.

Bayan has a strong presence in both the coking and thermal coal markets and is aiming to expand this presence through its association with KRL, it added. (denny)

Pakar Project JORC-compliant total Coal Resources and Reserves

Project	JORC Resources & Reserves
	Inferred Resources	Indicated Resource	Measured Resources	Reserves	Total
South Pakar	2,171Mt	853.7 Mt	301.75Mt	-	3,326Mt
North Pakar	172Mt	201Mt	111Mt	116Mt*	484Mt
Total	2,343Mt	1,054.7Mt	412.75Mt	116Mt*	3,810Mt
*JORC Reserves are exclusive of JORC Resources; and comprise 15Mt of Proved Reserves and 101Mt of Probable Reserves

Pakar Project-JORC-compliant Resources Average Coal Quality

Project	Average Coal Quality-Resources
	TM% (adb)	IM% (adb)	Ash% (adb)	TS% (adb)	CV kcal/kg		RD (adb)
					adb	(gar)
North Pakar	39.1 - 43.1	18.6	5.1 - 5.7	0.13 - 0.14	5,160 - 5,255	3,595?- 3,930	1.36
South Pakar	45.5 - 54.3	12.6 - 14.4	4.0 - 14.5	0.17 - 0.28	4,599 - 5,443	?	1.39 - 1.48