Southern Arc Minerals has entered into a binding term sheet with PT Ancora Indonesia Resources for the sale of its West Lombok Gold-Copper Project in West Nusa Tenggara, Indonesia. Ancora, which is listed on the Jakarta Stock Exchange, will acquire all issued and outstanding shares of Southern Arc’s Singaporean subsidiary Indotan Lombok Pte Ltd.
Indotan Lombok owns 90% of Indonesian company PT Indotan Lombok Barat Bangkit which holds an IUP on the West Lombok Property on Lombok Island.
The West Lombok property covers a 13km long by 7km wide northwest trending structural corridor of mineralisation and alteration hosting three main prospects - the Pelangan epithermal gold prospect, Mencanggah epithermal/porphyry district and Selodong porphyry intrusive complex.
In consideration for the acquisition, Ancora will pay Southern Arc US$2 million and will grant the company a 3% net smelter return royalty on any production from the property. Ancora may buy back this royalty at any time for US$2 million.
Southern Arc will provide a loan of US$1 million to Ancora which will be used specifically to cover costs of drilling and geological consultants to work towards the preparation of a JORC-compliant ore reserve report.
The loan will be repayable within one year and will accrue interest at the LIBOR rate plus 3%. The property is also subject to an existing 2% net smelter return royalty in favour of a third party which may be purchased for US$1 million.
The completion of the acquisition is subject to a number of conditions precedent including due diligence, assignment of the existing royalty agreement and finalising the loan and royalty agreement with Southern Arc.
The West Lombok project reportedly has inferred gold resources of 1.49 million ounces, silver resources of 1.82 million ounces and 397.3 million pounds of copper.
Ancora president director Teddy Kusumah Somantri said recently, “After the acquisition is complete, we will undertake a feasibility study and work on the environmental impact analysis document, so that, hopefully, we can start production in early 2019.”