ASX Release EQX expects to move into coal production in Q3 2008. 06 May 2008, Perth: The Board of Directors of EQiTX Limited (ASX: EQX) is pleased to provide shareholders with an update on the progress being made with regards to its previously announced intentions to move into coal exploration and production in Indonesia. As already announced, the Company has signed two Memoranda of Understanding with PT Mega Coal Indomine (Mega Coal) that cover coal permits in both East and South Kalimantan. The Company is currently carrying out a due diligence drilling program on the South Kalimantan permits and has just commenced the planned detailed due diligence drilling program on the East Kalimantan permits. Early results from the drilling indicate that, as expected, the permits comprising the South Kalimantan MOU (MOU 1) contain a quantity of coal, but further drilling and analysis is required to delineate a coal resource within the permits. The Board is confident that the detailed drilling program on the permits covered under MOU 1 will also deliver encouraging results. New Production Project The Company today announces that it has signed an additional binding terms sheet with Mega Coal whereby EQX will take a 51% interest in the net profits from production of coal from the Indonesian mineral permit currently held by PT Alam Duta Kalimantan and located in Kintap, South Kalimantan. The permit is well developed and ready to move into production in a very short time frame. The transaction is subject to due diligence by EQX with the key terms being: • the identification to the satisfaction of EQX of a minimum 4 million tonnes coal reserve at a strip ratio of less than 8:1 within the permit area and with a minimum CV of 5300 GAD (regardless of JORC classification), and • the proper issue of the Exploitation Licence to PT Alam Duta Kalimantan. In early April 2008, the EQX Board commissioned GMT Indonesia to prepare a report for the Board, the purpose of which was to confirm, with a reasonable degree of certainty, that at least 4 million tonnes of coal (regardless of JORC classification) existed within the permit as well as to express an opinion as to the likely quality of the coal in the concession. That report has not yet been completed, however the geologist has confirmed that there is a minimum of 4 million tonnes coal reserve at a strip ratio of less than 8:1 within the permit area and with a minimum CV of 5300 GAD (regardless of JORC classification) within the permit area. The geologist is in the process of preparing his report which will be included in the Notice of Meeting to be released by EQX shortly. Based on this confirmation, the EQX Board has resolved to pay Mega Coal US$2.5 million for its 51% position on the basis that the Joint Venture (JV) between EQX and Mega Coal will bear the operational risk of the coal project, however, Mega Coal has agreed to refund the $2.5 million consideration to EQX in the event that the JV fails to achieve an average price for the first 12 months of operation of US$40.00 per metric tonne. In addition, EQX will pay Krypton International Pte Ltd (Krypton) an introductory fee of 1.5 million EQX shares. Krypton has introduced the opportunity to EQX and this fee is compensation for this work. The shareholders of Krypton are directors of Corporate and Resource Consultants (Singapore) Pte Ltd and parties related to Capital Investment Partners Pty Ltd but are not related parties of EQX. These shares will be subject to a voluntary escrow of at least 12 months or such longer period as required by ASX. The Board of EQX have also decided that with this transaction and the strong likelihood of moving into coal production in the second half of 2008, it is now an appropriate time to hold a general meeting and ask shareholders to approve a change of name and the change of direction of the Company, as well as the already announced process of finalising the in specie distribution of EQX’s remaining biotechnology assets. It is expected that this meeting will be held in early July 2008 and a notice of meeting and accompanying explanatory statement, including details of the report by GMT Indonesia on the new permit, will be mailed to shareholders during May 2008. Therefore, subject to completion of the due diligence, shareholder approval, the entry into a formal agreement, and ASX providing conditional approval to the re-admission of EQX to the Official List as a resource company, the Company will change activities and focus on the coal sector. As a result of the proposed change of the Company’s activities to focus on the resources sector, EQX will be required to satisfy the requirements in Chapters 1 and 2 of the ASX Listing Rules as if the Company were applying for admission to the official list. With cash reserves currently standing at approximately $13 million and the Company already having 400 shareholders that hold a marketable parcel of shares worth at least $2000 per parcel, the Board does not intend to undertake a capital raising as part of this transaction. As detailed above, EQX is still carrying out due diligence on the permits in South and East Kalimantan. The Company will advise shareholders at a later date as to how these opportunities are progressing, including any proposal for a further capital raising to fund the opportunities (which is not expected to be required until at least late 2008). Building the Board and Management Team As previously announced, as part of the planned change of direction, EQX will be building on its Board and Management team. Jim Dracopoulos will be joining the Company as Managing Director upon the receipt of shareholder approval for the change in the Company’s activities. Jim is a finance executive with over 20 years of Australian and international experience in finance, administration, marketing and general management in the Mining and Construction industry. Jim has developed a broad range of skills and experience in the resources industry, having recently completed 13 years with Straits Resources Limited, an ASX listed resources company focussed on the coal sector. Prior to working with Straits, Jim had worked in finance and commercial roles with Western Mining Corporation, Macmahon Contractors, Pancontinental Gold, and the coal production department of the Electricity Trust of South Australia. For seven of the past ten years with Straits, Jim was based in Indonesia and Singapore in various roles including CFO, Operations Manager, Country Manager (Indonesia), and Managing Director of the company’s commodity trading business. He has also held directorships of various Indonesian, Singaporean and Australian subsidiary companies of Straits Resources Limited, and has a solid understanding of corporate governance matters. Jim has already identified a number of key operational roles that will need to be created and the process of recruiting those personnel is well advanced. Other additions to both the Board and Management team will be announced in due course. Details of the In Specie Distribution of the Biotechnology Assets As already announced, whilst EQX has not been able to develop either VacTX or ZingoTX to a commercial level, there is a possibility that these projects may ultimately generate some commercial value. The Board has decided, subject to shareholder approval, to carry out an in specie distribution of these assets to all EQX shareholders as at the nominated Record Date. The Record Date will be 5 business days after the date of the General Meeting that seeks to approve resolutions pertaining to the change of direction of the Company as well as approving the in specie distribution itself. The biotechnology assets will be held in a public entity that will have a Board to oversee the two projects and the opportunities that develop for their potential commercialisation. Whilst there is no guarantee that there will be any returns from these assets, this structure seeks to maximise, for shareholders, whatever returns are achieved over time. The Company is also receiving taxation advice on this matter in order to try and minimise any taxation obligations arising from the proposed demerger to EQX shareholders and the Company will keep shareholders informed of this situation in the lead up to the General Meeting. Anticipated Timetable The anticipated timetable for completion of the transaction and the matters referred to in this announcement is set out below: Sign binding Terms Sheet with Vendors of Alam Duta Project 6 May 2008 Pay $US2.5 million acquisition fee for 51% of the Project 12 May 2008 Despatch Notice of Meeting to shareholders to consider and approve resolutions relating to the proposed transaction 30 May 2008 Suspension of EQX’s securities from trading on ASX at the opening of trading 4 July 2008 General Meeting to approve the change of activities of the Company and other relevant resolutions 4 July 2008 Record Date for In specie distribution of biotechnology assets 11 July 2008 Relisting of EQX on the ASX 23 July 2008 PLEASE NOTE: THE ABOVE DATES ARE SUBJECT TO CHANGE Summary The EQX Board believes that this additional acquisition will enable the Company to move into coal production in the second half of 2008 and as a result the “new look” EQX should provide significant upside to EQX shareholders as the permits covered under MOU 1 and MOU 2 also move through the due diligence phase and into feasibility planning. The Board expects to achieve its goal of becoming a coal producer during 2008 and looks forward to gaining shareholder support for this initiative at the general meeting in early July 2008. Commenting on the progress that EQX has made in recent months in transforming itself into an Indonesian based coal exploration and production company, Chairman Geoff Gander said, “The Company is now being approached by a number of groups that have access to what appear to be highly prospective coal permits. In all cases they require a partner that can offer them an experienced, locally based operations team as well as access to capital. These are the key ingredients that are needed to take these permits into production and EQX is able to deliver on both fronts. Over the coming months, we look forward to being able to develop these relationships into more coal production opportunities for EQX.” All inquiries regarding this announcement should be directed to EQX, through the Chairman Geoff Gander, who can be reached on 0417 914 137. Annexure 1 BALANCE SHEET Set out below, for the purpose of illustration only, is an unaudited pro forma consolidated balance sheet of the Company as at 31 December 2007 taking into account the effect of the Offer made pursuant to Term Sheet and assuming completion has occurred. The pro forma consolidated balance sheet illustrates the effect of the Offer as if the issue of securities occurred on 31 December 2007 (based on the assumptions below). The financial information is presented in abbreviated form and does not contain all the disclosures that are usually provided in an annual report prepared in accordance with the Corporations Act. Audited Pro- forma Consolidated Consolidated December 07 December 07 $ $ Current Assets Cash and cash equivalents 11,809,919 13,619,010* Trade and other receivables 129,789 129,789 Prepayments 50,949 50,949 Other current assets 2,310,018 2,310,018 Total Current Assets 14,300,675 16,109,766 Non Current Assets Plant and equipment 4,389 4,389 Exploration expenditure - 3,140,909 Available-for-sale financial assets 39,750 39,750 Investment accounted for using the equity method 1,105,555 1,105,555 Total Non Current Assets 1,149,694 4,290,603 Total Assets 15,450,369 20,400,369 Current Liabilities Trade Payables 997,922 997,922 Interest bearing loans 59,600 59,600 Total Current Liabilities 1,057,522 1,057,522 Total Liabilities 1,057,522 1,057,522 Net Assets 14,392,847 19,342,847 Equity Contributed equity 64,881,975 69,831,975 Accumulated losses (51,060,478) (51,060,478) Other reserves 571,350 571,350 Total Equity 14,392,847 19,342,847 The pro forma consolidated balance sheet assumes the issue and allotment by the Company of 1,500,000 shares at an issue price of 20 cents as an introduction fee. *The cash balance includes $4.65 million which represents the amount the Company has raised by way of convertible loan post 31 December 2007. Annexure 2 CAPITAL STRUCTURE No. of shares $ Opening balance 140,814,170 64,881,975 Issue of 23,250,000 shares @ 20 cents * 23,250,000 4,650,000 Issue of 1,500,000 million shares @ 20 cents 1,500,000 300,000 Total Equity 165,564,170 69,831,975 * This represents the issue of shares as a result of the conversion of the converting loan approved on 6 February 2008 by shareholders. In addition to the above equity, EQX also has the following securities that are not quoted on the ASX: Convertible Notes, 8% p.a., redemption date 31 Dec 2008 700,000 Employee Options, exercise price $0.20, expiry date 08 May 2008 200,000 Unlisted Options, exercise price $0.20, expiry date 31 Dec 2010 750,000 Unlisted Options, exercise price $0.25, expiry date 04 Aug 2011 1,000,000 Unlisted Options, exercise price $0.30, expiry date 31 Dec 2012 1,000,000 ENDS
EQX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held