Southern Arc sell West Lombok property to Ancora

By Romel S. Gurky

TSX-listed Southern Arc Minerals Inc said that it has entered into a binding term sheet with IDX-listed PT Ancora Indonesia Resources Tbk (PT AIR) pursuant to which PT AIR will acquire all of the issued and outstanding shares of Southern Arc's Singaporean subsidiary, Indotan Lombok Pte Ltd.

Southern Arc said in a statement Tuesday that Indotan Lombok Pte owns 90 percent of Indonesian company PT Indotan Lombok Barat Bangkit which holds an IUP mining license on the West Lombok Property located on Lombok Island in Indonesia.

The West Lombok Property covers a 13-km long by 7-km wide northwest trending structural corridor of mineralization and alteration hosting three main prospects: the Pelangan epithermal gold prospect, the Mencanggah epithermal/porphyry district, and the Selodong porphyry intrusive complex.

In consideration for the acquisition, PT AIR will pay Southern Arc US$2 million and will grant the company a 3 percent net smelter return royalty on any production from the West Lombok property, the statement said. PT AIR may buy back this royalty at any time for US$2 million.

Southern Arc said it will provide a loan of US$1 million to PT AIR which will be used specifically to cover costs of drilling and geological consultants to work towards the preparation of a JORC compliant ore reserve report. The loan will be repayable within one year and will accrue interest at the LIBOR rate plus 3 percent. The property is also subject to an existing 2 percent net smelter return royalty in favor of a third party which may be purchased for US$1 million.

The completion of the acquisition is subject to a number of conditions precedent including due diligence (to be completed in 45 days), assignment of the existing royalty agreement and finalizing the loan and royalty agreement with the Southern Arc (to be completed in 60 days).

Editing by Reiner Simanjuntak