Letter of Intent (“LOI”) between Indo Mines Ltd. and Indo Energy Pty Ltd and KAL Energy, Inc. and Thatcher Mining Pte Ltd
Exhibit
99.1
Letter
of Intent (“LOI”)
between
Indo
Mines Ltd.
and
Indo
Energy Pty Ltd
and
KAL
Energy, Inc.
and
Xxxxxxxx
Mining Pte Ltd
This is
an agreement between Indo Mines Ltd, an Australian publicly listed company with
its registered office at Xxxxx 0, 00 Xxx Xxxxxxxxx, Xxxxx XX 0000 (“IDO”), Indo
Energy Pty Ltd, a wholly owned subsidiary of IDO registered in Australia
(“INDE”), KAL Energy, Inc., an American publicly listed company with its
registered office at World Trade Center, 14th Floor,
Xx. Xxxx. Xxxxxxxx Xxx. 00-00, Xxxxxxx, Xxxxxxxxx (“KALG”) and Xxxxxxxx Mining
Pte. Ltd, a wholly owned subsidiary of KALG with its office registered at 000
Xxxxxxxxx Xxxx #00-00, Xxxxxxxxx 000000(“TM”).
Purpose
& Scope
The
purpose of this LOI is to document the intent of IDO/INDE and KALG/TM to
establish and operate a Joint Venture to conduct Phase II exploration on, and to
develop and put into production, KALG/TM’s “Graha” coal concession in East
Kalimantan, Indonesia. It also sets forth the underlying principles
for establishing the Joint Venture.
Background
In August
2005, IDO commenced an evaluation of a large iron sands project in
Indonesia. The Company plans to focus primarily on the Jogjakarta
Project in Indonesia as well as other potential Indonesian
developments. The Directors of IDO are excited about the prospects of
the Jogjakarta Ironsands Project in Indonesia and believe this project has the
potential to build the Company into a mining house which will transform the
value of shareholders’ interests. IDO is incorporated in Australia,
and is publicly traded on the ASX.
KALG,
through its wholly owned subsidiary TM, has economic rights to two coal
concessions near the Mahakam River in East Kalimantan, Indonesia. One
of those concessions — Graha — contains a JORC Compliant resource of 248 million
metric tons of thermal coal, of which 141 million tonnes is in the Indicated
category and 107 million tonnes is in the Inferred category. KALG/TM
has commenced exploration programs and feasibility studies on these concessions
to determine their commercial viability. KALG/TM intends to develop
and produce coal from these concessions in a socially, environmentally and
economically sustainable manner, as guided by the Equator
principles. End markets for KALG/TM’s thermal coal product include
local Indonesian consumers as well as export markets in India, China, North
Asia, and Southeast Asia. KAL Energy is incorporated in the State of
Delaware and is publicly traded on the NASDAQ OTCBB.
IDO/INDE
and KALG/TM have discussed the mutual benefits that could arise from working
cooperatively on the development of Graha. As a consequence, both
parties are entering into this LOI to explore the feasibility of establishing a
Joint Venture to progress the exploration, development, and construction of the
Project, with the goal of establishing a mine site capable of producing at least
2 Million tonnes of thermal coal per year.
Overview
of Proposed Joint Venture Terms
Subject
to a successful due diligence process, KALG/TM and IDO/INDE intend to form a
Joint Venture to:
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complete
the exploration program on the Graha
concession;
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complete
all permitting and land access activities, transportation studies,
environmental studies, mining studies, marketing, and economic feasibility
studies required to advance the project to a final investment decision,
and,
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if
economic feasibility is established and a positive Decision to Mine is
taken, undertake the construction activities required to bring the project
into production.
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It is
agreed that the respective working interests in the Joint Venture will
be:
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IDO—70%
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KALG—30%
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In return
for its 70 percent net working interest in the project, IDO/INDE agrees to pay
100 percent of the future costs attributable to the Exploration, Feasibility,
and Development phases of the Graha project, thus providing KALG/TM with a free
carry from the date of this LOI until a Decision to Mine is taken on the
project. Once a Decision to Mine is made, KALG/TM and IDO/INDE will
each pay their working interest share of all capital and operating costs going
forward.
Moreover,
IDO/INDE agrees to pay KALG/TM the sum of US$1,300,000 in recognition of the
historic costs incurred by KALG/TM on the Graha concession. The
payment will be staged in accordance with the following schedule:
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US$100,000
during the Due Diligence period (See Section
IV)
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A
further US$100,000 upon completion of successful due
diligence;
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Following
execution of a Joint Venture Agreement, IDO/INDE shall also remit, in
seven equal monthly installments, the sum of
USD$1,100,000.
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Responsibilities
Under this LOI
IDO/INDE
and KALG/TM shall undertake the following activities:
Phase
A: Exclusive Due Diligence
IDO/INDE
shall immediately commence an Exclusive Due Diligence process. Given
the scope of work already undertaken by IDO/INDE in respect of Graha, it is
expected that the Due Diligence process will be completed within 60
days.
In
consideration for the Exclusivity Period, IDO/INDE shall remit the sum of
USD$100,000 to KALG/TM as follows:
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A
payment of USD$25,000 within 2 days of signing this
LOI;
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A
payment of USD$25,000 within 14 days of signing this
LOI;
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A
payment of USD$25,000 within 30 days of signing this LOI;
and
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A
payment of USD$25,000 within 45 days of signing this
LOI.
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A further
payment of USD$100,000 is payable upon completion of successful due diligence at
the end of the Due Diligence period.
KALG/TM
shall not enter into any agreements with third parties relating to establishing
a Joint Venture on the Graha Project or sale of the Graha Project or TM during
the Exclusivity Period.
KALG/TM
shall undertake to provide IDO/INDE with reasonable access to staff, technical
and commercial information, and any other materials required by IDO/INDE to
conduct its due diligence in a timely and effective manner.
IDO/INDE
shall evaluate the technical and commercial aspects of the KALG/TM Graha Project
as expeditiously as possible.
Phase
B: Exploration and Feasibility
Upon
completion of successful due diligence by IDO/INDE, KALG/TM and IDO/INDE shall
execute a Joint Venture Agreement for the purpose of forming a Joint Venture to
explore and develop the Graha project. On formation of the Joint
Venture, the working interests of the parties will be 70% IDO/INDE and 30%
KALG/TM.
The Joint
Venture will establish an Operating Committee to oversee project activities,
including the establishment of a Work Program and Budget with IDO/INDE being
entitled to appoint two members and KALG/TM being entitled to appoint one
member. Each member of the Operating Committee is entitled to
exercise one vote on the Operating Committee. The decisions of the
Operating Committee shall be by majority vote and shall bind the
parties.
IDO/INDE
will act as operator/manager of the Joint Venture. IDO/INDE shall
contract KALG on commercial terms to conduct the Graha exploration and
feasibility programs on behalf of the Joint Venture, with the following key
deliverables;
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Independent
JORC Resource and Reserves
Statement
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All
necessary Government approvals and
permits
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Land
access rights
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Completed
XXXXX (Environmental Impact
Assessment)
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Completed
Feasibility Study
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Once the
Work Program and Budget (including manpower and overhead costs) have been
approved, IDO/INDE will fully fund the Work Program and Budget through the end
of the Exploration, Feasibility, and Development Phase.
Following
execution of a Joint Venture Agreement, IDO/INDE shall also remit, in seven
equal monthly installments, the sum of USD$l,100,000. This sum, along
with the US$100,000 payable during the exclusivity period and US$100,000 payable
upon successful completion of due diligence at the end of the Due Diligence
period, is intended to satisfy IDO’s obligations in respect of historic
costs.
Phase
C: Construction
IDO/INDE
will continue as Operator during the Construction phase of the
project. All capital and operating costs incurred during this phase
of the project will be borne by the parties in accordance with their respective
working interest shares in the project.
Phase
D: Production
Once
production has commenced, IDO/INDE and KALG/TM will bear their share of
operating costs and all future capital costs in accordance with their respective
working interests, and each party shall receive revenue from the production in
proportion to its respective Joint Venture working interest.
Furthermore,
it is the intention of the Joint Venture to enter into a Coal Sale and Purchase
Agreement with IDO for the supply of 1 to 2 million tonnes of Graha coal per
annum to IDO at market prices for domestic consumption in
Indonesia. Other marketing activities will be conducted jointly by
the parties, with costs funded in proportion to their respective Joint Venture
working interests.
It is
Mutually Understood and Agreed By and Between the Parties That:
This LOI
represents the whole agreement between the parties.
Any
modifications made to this LOI shall only be recognized after mutual written
consent of both parties.
Effective
Date and Signature
This LOI
shall be effective upon the signature of IDO/INDE’s and KALG/TM’s authorized
officials. It shall be in force from January 20,
2009. IDO, INDE, TM and KALG indicate agreement with this LOI by
their signatures.
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Xxxxxxx Xxxxxxx
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Xxxxxx Xxxxxx
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Xxxxxxx
Xxxxxxx
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Xxxxxx Xxxxxx | |
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Executive
Chairman
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Managing
Director
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KAL
Energy, Inc.
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Indo
Mines Ltd.
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Date:
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Date:
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//s//
Xxxxxxx Xxxxxxx
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//s//
Xxxxxx Xxxxxx
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Xxxxxxx
Xxxxxxx
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Xxxxxx Xxxxxx | |
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Director
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Director
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Xxxxxxxx
Mining Pte Ltd
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Indo
Energy Pty Ltd.
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Date:
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Date
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