FeOre Limited (ASX:FEO) has entered into a binding memorandum of understanding with Gain Diligence Limited to acquire 100% of Quangas Poly, which owns oil and gas interests in the Kyrgyz Republic.
Quangas has cooperation and profit sharing agreements with the Kyrgyz Republic national oil and gas company concerning three oil projects for a period of 20 years.
The blocks adjoin large oil producing assets belonging to the governments of Kyrgyz Republic, where numerous oilfields are in production.
There is significant potential for new discoveries, both from the shallow reservoirs and from deeper, larger scale prospects from the blocks and nearby potential forfurther acquirable blocks.
Quangas plans to build a production plant with an annual production capacity of 220,000 tonnes within 3 years, with trial production to potentially commence within 6 months, subject to approvals and funding.
Most preliminary work has been completed, and drilling work is scheduled to commence in August of 2014.
In consideration for the acquisition FeOre will pay to the Seller up to US$23 million, with the final price to be adjusted according to an independent valuation of the target company.
FeOre will pay a deposit of US$10m, refundable in the event that the transaction does not complete.
Since selling its Mongolian iron ore assets, FeOre has sought to acquire potentially profitable commodity assets in the Central Asian region.
