Under the agreement, Coal Fe will pay Bungo $35 million in cash and $15 million in shares, consisting of either 36 million Coal Fe shares valued at A50c (US42c) each or 273 million shares in Coal Fe subsidiary PT Techventure Indocoal at 500 rupiah (US5.5c) per share, for its stake in NTC.
NTC owns a 30-year coal concession over a 2832-hectare area in the Muara Bungo Regency in Jambi Province with a historical, non-JORC compliant resource of 29.9 million tonnes of coal in three potential coal seams.
The agreement is conditional on the successful raising of $40 million by Coal Fe from financial institutions or investors, Coal Fe completing a financial and legal due diligence as well as an independent geologist's report on NTC, and Bungo providing an undertaking to Coal Fe to settle all outstanding actual and contingent liabilities of NTC.
Shareholders of both NTC and Coal Fe will also have to approve the transaction.
Coal Fe added that it is currently in discussions with a financial institution to procure a $20 million secured credit facility to assist with the acquisition and development f the project.
The resource at the concession was calculated by mining consultant John Boyd in February 1996 in accordance with the Coal Resource Classification System of the US Geological Survey.
Coal Fe said it considered the estimate to be reliable, as Boyd modelled the resource using a software package routinely used for coal resource modelling while the system used was similar to that of the JORC code.
It added that it had appointed Perth-based consultancy Ravensgate to undertake an independent resource review that will include drillhole data quality verification and validation.
Coal Fe noted that additional work in the form of drilling may be needed to confirm the results of the initial study or to complete an independent resource model based on the new results if the necessary data was no longer available.
The company also said the acquisition of the stake in NTC would allow the company to participate in a significant exploration and development program within a high potential coal concession, moving it closer towards becoming a producer.
