Mill City revises LOI to acquire North East Tanjung Block
Friday, February 14 2014 - 12:44 AM WIB
TSX-listed Mill City Gold Corp announced Thursday the signing of a revised Letter of Intent (LOI) to purchase up to a 75 percent working interest in the North East Tanjung Block, an onshore Indonesian gas concession and production sharing contract, from PT Trimata Energi Investama (PTTEI).
PTTEI is an Indonesian company which owns 85 percent of the shares of PT Anugerah Trimata Kaltim Energi (PTATKE) that holds a 100 percent working interest in the project.
"This is an incredible opportunity for Mill City and our shareholders to acquire a majority stake in a high potential gas field, located in a friendly jurisdiction with a shortage of natural gas production," stated James R. Brown, Mill City's Chairman, President and CEO.
The North East Tanjung Block project is located at Kutai Barat Regency, East Kalimantan Province, which is approximately 180 km to the north-west of Balikpapan City. The project area covers approximately 5,453.27 square kilometers within the onshore Kutai Basin. Geologically, the project area is situated in the Western Kutai Basin, known as the Upper Kutai Basin, which is one of the most prolific petroleum basins within Indonesia.
Moreover, from a previous study on adjacent ground, the gas potential has been proven in the Mendung Well, within the onshore West Kutai.
Mill City said there are three target "pay zone" formations on the project. Previous work conducted on the project by the Indonesian government indicates that a gas resource is present. The company intends to complete a NI 51-101 report in due course to verify this resource.
To confirm the potential of the North East Tanjung Block, the parties plan to conduct exploration activities including drilling 2 exploration wells and 2 delineation wells, and to conduct a 2D seismic survey over a 2 km x 300 km area by the end of 2016. The estimated total cost to complete the exploration program is approximately US$32 million.
To earn an initial 45 percent working interest in the North East Tanjung Block, Mill City will deposit US$32 million into a mutually acceptable escrow account to provide the working capital to conduct the work program described above and to issue that number of Mill City shares equal to 49 percent of Mill City's issued and outstanding share capital upon closing of the transaction (inclusive of any shares that may be issued under any concurrent equity financing that may be conducted in connection with the transaction), which shares shall be subject to such resale restrictions and hold periods as may be imposed under applicable securities laws and the policies of the exchange.
Commencing three years plus one day from the closing of this transaction, for a period of 90 days, Mill City has the right to acquire an additional 30 percent working interest in the North East Tanjung Block by issuing to PTTEI that number of shares equal to 49 percent of Mill City's issued and outstanding share capital at that time less the number of shares issued by Mill City to acquire the initial 45 percent working interest.
The LOI allows for up to ninety (90) days from the signing to complete due diligence and to arrange the required financing.
The foregoing transaction will be considered a "reviewable transaction" under the policies of the TSX Venture Exchange and is subject to certain closing conditions, including but not limited to the approval of the TSX Venture Exchange and the execution of a definitive agreement.
Mill City first signed the LoI in January of this year with the intention of acquiring up to 60 percent interest in the North East Tanjung Block.
Editing by Reiner Simanjuntak