expects to move into coal production in q3 .08

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