Proposed settlement with PT. Mega Coal IndominePT. Mega Coal...

Proposed settlement with PT. Mega Coal Indomine
PT. Mega Coal Indomine (Mega Coal) and the Company have been in
negotiations since January 2009 regarding the winding up of the proposed
working relationship between the parties and the payment of a settlement to
the Company by Mega Coal in relation to outstanding monies due from Mega
Coal. Since that time, Mega Coal has acknowledged in writing on numerous
occasions that monies are owed to the Company, but to date has not been
able to or has not been willing to refund any monies owed to the Company.
Since 28 July 2009 these discussions have been facilitated by a professional debt
collection firm located in Indonesia and the current status of the discussions are
as follows:
• The wording of a settlement agreement between the parties has been
drafted.
• The settlement agreement has not been executed by either party.
• The Company has advised Mega Coal that the settlement agreement will
not be executed by the Company unless the Company has received
cleared funds in its nominated account for the full settlement amount.
• The proposed settlement amount is $US3.25m (less debt collection costs,
see below).
• A signed cheque has been received by the debt collection firm for
$US3.25m but Mega Coal has confirmed they currently do not have the
funds to honour the cheque.
• The cheque has therefore not been presented for payment.
• If cleared settlement funds are received by the Company there will be a
fee payable to the debt collection firm amounting to 30% of the settlement
amount - namely $US975,000.
• The net settlement amount paid to the Company will therefore be
$US2,275,000.
The key terms of the proposed settlement agreement with Mega Coal are as
follows:
1. Mega Coal will make a one-off payment to the Company of
US$2,275,000 (net of debt collection fees) in full and final
satisfaction of all monies due to the Company from Mega Coal
only in respect of all the Projects.
2. The Company will cease to be involved in the Projects in any way.
3. In the case of the Kintap Project:
• the ‘Life of Mine’ contract will be terminated thereby
returning full control of the Kintap Project to Mega Coal;
• the Company and Mega Coal ‘agree to disagree’ over the
quantity and quality of the coal in ground at Kintap;
• the pledge of shares given by the shareholders of the PT
Alam Duta Kalimantan, as the Kintap mining license holder,
will be cancelled;
• the personal guarantee given by Mr. N. Pranoto to the
Company will be cancelled;
• the Company and Mega Coal will co-operate in promptly
winding up their Indonesian joint venture company which
was appointed as operator of the Kintap Project.
4. No legal or other action will be taken by:
• the Company against Mega Coal, Mr. Nugroho Suksmanto
or Mr. Michael P. Rhodes; or
• Mega Coal against Equatorial, Titan Resources Pte Ltd., Mr.
Geoff Gander, Mr. Paul Sharbanee, Mr. Sol Majteles or Mr.
Scott Mison.
The Company remains uncertain as to whether the above proposed settlement
with Mega Coal will occur and whether the Company will receive funds of
US$2.275 million (net of debt collection fees). It should be further noted, that
even if a settlement agreement is executed between the parties (as outlined
above, or another proposal) that there can be no guarantee that the Company
will receive the required funds from Mega Coal.
Should a settlement with Mega Coal not be completed, the Company will then
consider taking additional measures to recover some or all of the monies owed
by Mega Coal, including legal action.