Pan Asia updates Indonesian coal projects
Monday, September 6 2010 - 02:57 AM WIB
Further to the previous announcements made by Pan Asia Corporation, the Company provides the following information by way of update regarding Pan Asia?s proposed acquisition of an interest in certain coal projects in Indonesia through the purchase of all of the issued capital of Innovation West Pty Ltd (Innovation West or IW) (Acquisition).
Innovation West
As previously announced, Innovation West is an Australian company which has an interest in a number of coal projects in Indonesia. Upon completion of the Acquisition of Innovation West, the Company will acquire a significant and balanced package of coal assets. Details of the asset package and key commercial points are summarised in this release.
Pan Asia?s Board and management are very enthusiastic as to the quality and prospectivity of these interests and are committed to completing the Acquisition as soon as is practicable.
The projects being acquired provide:
- Immediate cashflow via a financing provided for the expansion of production (Nadvara)
- A flagship project that is in pre-development stage (TCM)
- A flagship exploration project (BCKP I SIM)
- A number of exploration projects & a pipeline of additional project opportunities
The Company believes this combination of assets provides the Company with the platform to achieve its initial goal of becoming a significant supplier of competitively priced energy to Asia.
The projects that Pan Asia gains access to via the Acquisition of Innovation West are detailed in Attachment A but are overviewed below:
Immediate Cashflow Project ?Financing Provided for Expansion of Production ? Thermal Coal, East Kalimantan
* Nadvara (?NAD?) ? financing and offtake rights
- Current production ramping up to 1.2 Mt per annum & then I .8Mt per annum.
- Calorific Value averages 5,300 kcal I kg (adb).
- Excellent location with haulage road, stockyard and conveyor loading jetty all operational.
- JORC reserve of 5.84 Mt and Measured and Indicated resource of 19.63 Mt with additional potential.
- USD 5 M advance already provided for expansion of production, repayable to 1W from production plus royalty.
- Offtake rights - first 4.8 million tonnes of coal sold to Noble Resources (?Noble?).
Flagship Project - Pre Development ? Thermal Coal, South Kalimantan
* Transcoal Minergy (?TCM?) ? 75% interest
- Targeting long life underground operations
- Possible initial open pit.
- Calorific Value of ~6,500 - 6,800+ kcal/kg (adb).
- Maiden JORC resource of 19.75Mt (Indicated) and 11 Mt (Inferred).
-Additional drilling now targeting 50Mt to 60Mt Exploration Target1.
- MOA?s signed with significant international underground coal mining groups with existing operations in Indonesia.
Flagship Exploration Project ? Thermal Coal, East Kalimantan
* Baramega Citra Kutim Permai and Suiya Ibrahim (?BCKP & SIM?) ? right to earn a 50% interest
- 32,307 Ha with coal outcrops of significant thickness.
- Calorific Value expected between ~5,400-5,800 kcal / kg (adb).Historic exploration with 27 holes drilled.
- Initial exploration target of 50 to 70 Mt?.
Exploration Projects ? Thermal Coal - East Kalimantan except where stated
* Jaya Kanigara (?JK?) ? 80% interest South Sumatra
4,500 Ha concession, highly prospective for large coal deposits.
Initial Exploration target of 10 to 20 Mt?.
* Ratu Ayu (?RAY?) ? right to earn a 50% interest
- 1,508 Ha adjacent to concessions hosting large tonnage of coal
- Potential to form part of large regional project
- Exploration target of 10 to 15 Mt?.
Project Pipeline
* Perdana Maju Utama (?PMU?) - Financing & offtake rights
- Right to offtake a portion of production via a pre-financing.
- Possible Q4 2010 development.
- Calorific Value of ~5,200 - 5,700 kcal/kg (adb).
* Permata Buana, Seka Prima Energy and Sena Mediatama (?PB, SPE & SM?) ? 80% interest
- 3,177 Ha + with coal outcrop identified over 6 km of strike length.
- Calorific Value expected between ~4,800-5,800 kcal/kg (adb).
- Potential to form part of large regional project in Bengalon area
- Exploration target of 20 to 30 Mt.?
* The upgraded asset portfolio has been negotiated by IW with various Indonesian groups, one of which is led by Mr Honardy Boentarlo (proposed director of Pan Asia as IW nominee upon completion of Acquisition). Under the agreement with Honardy Boentario, IW also has rights to additional coal projects held and being acquired by Mr Honardy Boentario located in East Kalimantan and the Berau coal producing area.
? Exploration Targets:
It is common practice for a company to comment on and discuss its exploration and development in terms of target size and type. The information included in this announcement relating to the production, development or exploration target should not be misunderstood or misconstrued as an estimate of Mineral Resources or Ore Reserves. The potential quantity and grade is conceptual in nature, since there has been insufficient exploration to define a Mineral Resource or Reserve. It is uncertain if further exploration will result in the determination of a Mineral Resource or Reserve. The current interpretation remains preliminary and is based on exploration, evaluation and resource definition work performed by the current owners
Offtake Rights
* Offtake rights for production from NAD, PMU, BCKP & SIM and RAY.
A key part of the Company?s strategy is to acquire the offtake rights of projects in which it is involved. To this end, it has formed a relationship with Rockfield Resources as an adviser in the handling of these offtakes. The first completed offtake for 4.8 million tonnes of coal from Nadvara with Noble was recently announced (refer ASX announcement 23 August 2010).
Pursuant to this arrangement, IW has entered into a coal purchase agreement with Noble, with coal deliveries to commence September 2010. Noble has provided finance of $2 million to IW and Pan Asia has agreed to provide a corporate guarantee to Noble in connection with this financing.
A thorough legal due diligence process over the major rights being acquired (NAD and TCM) has been completed and is in the final stages of completion on the secondary assets. The due diligence for acquiring IW has been satisfied as the Board considers the major rights (NAD and TCM) being acquired are more than sufficient to proceed with the Acquisition. The Company is well advanced now with the preparation of the Notice of General Meeting for seeking shareholder approval for the Acquisition of IW (refer section 5 of this update for indicative timing).
2. Confirmation of Terms of the Acquisition
As previously advised, the material terms of the Acquisition are as follows:
(a) Pan Asia will acquire all of the abovementioned interests by purchasing all of the issued capital of Innovation West.
(b) The consideration to be paid to the vendors of Innovation West (Vendors) will be 655,000,000 fully paid ordinary shares in the capital of Pan Asia (noting that 25,000,000 performance shares were initially provided for with a performance hurdle to conversion which has now been achieved upon the signing of the offtake agreement with Noble Resources. These will now be issued as fully paid ordinary shares).
(c) Pan Asia will reimburse Innovation West for all expenses incurred in relation to Innovation West?s own legal, financial and technical due diligence enquiries in respect of the coal projects which it has acquired an interest in.
(d) Pan Asia has agreed to make loans available to Innovation West to assist Innovation West secure the rights in relation to the coal projects. These loans are to be repaid by Innovation West.
(e) The Vendors will be entitled to nominate 2 new members to the Board of Pan Asia.
(f) Completion of the Acquisition is subject to certain conditions (usually seen in these type of acquisitions), the key condition being the Company obtaining all necessary shareholder and other approvals for the Acquisition pursuant to the Corporations Act and the ASX Listing Rules.
3.Confirmation of ASX Requirements
ASX has confirmed that in order for Pan Asia to complete the Acquisition, it will be required to obtain shareholder approval for the change of nature and scale of Pan Asia?s activities arising from the Acquisition in accordance with Listing Rule 11.1.2 and comply with Chapters 1 and 2 of the Listing Rules, as if Pan Asia was applying to admission to the official list of ASX.
If shareholders approve the Acquisition, trading in Pan Asia?s securities will be suspended from the date of the shareholder meeting until such time as Pan Asia has complied with the applicable Listing Rules (including execution and delivery of any applicable Vendor escrow agreements). Pan Asia will endeavour to have these requirements satisfied shortly after the shareholder meeting. (end of edited excerpt)