Kalimantan signs option agreement on five coal concessions

Kalimantan Gold Corporation Limited has signed an Option Agreement to acquire a 75% stake in five coal concessions in Indonesia, a move designed to establish a presence for the company in Indonesia’s rapidly growing coal industry.

Pursuant to the Option Agreement, KGC will have exclusivity for a six month period in which to conduct its due diligence on the companies that hold the KP’s and carry out a minimum of 3,000 metres of drilling on the KP areas to assess the potential for coal reserves. To this end, KGC will work in close association with PT GMT Indonesia, an Indonesian-based consulting group which manages a number of coal exploration projects in East Kalimantan.

If KGC elects to exercise its option then the shares of each of the KP companies will be transferred to a new nominee company with the vendors retaining 25% of the shares in the new company. KGC will allocate 5% of its 75% interest to GMT as an incentive payment. Upon a decision to mine, the KP companies shall pay a cash bonus to the vendors based on the amount of coal reserves in each KP at the rate of US $0.25 Pt, with a minimum bonus of US$3 million and maximum of $25 million.

The Option Agreement, which covers a total of 25,2000 ha, is with the Indonesian Mesra Group which has a track record of securing good coal areas, having completed deals with Korean, Indian and Middle East companies.

CEO Rahman Connelly said, all five KP’s are strategically located in areas where coal occurrences are known to occur and, in some cases, the KPs are adjacent to, or along strike from, operating coal mines. Some of the concession areas also benefit from being located within seven kilometres of a port facility capable of loading barges for trans-shipment to mother vessels offshore.