Company Announcement
7 May 2008
Option to Acquire Interest in Philippines Coal Project
Dwyka is pleased to announce that it has entered into an option giving it the ability to acquire an interest in the Daguma and Bonanza coal deposits located on the Philippines island of Mindanao (collectively, the “Project”).
Highlights:
• From historical drilling, Dwyka estimates an initial overall Project resource of in excess of 200 million tonnes of medium calorific value coal, suitable for the export and domestic power markets
• Aggressive drilling programme to be pursued with the aim of increasing the Project resource significantly
• Project is ideally located close to the coast (approximately 45 kilometres away), making it suitable to supply the export markets or in-country power stations
• Options allow Dwyka, subject to shareholder approval, to acquire an initial 30% interest in the Project, with the possibility of increasing this interest to a maximum of 100%
• Option fees payable by Dwyka only on exercise.
Dwyka has today signed an option agreement (“ACRL Option Agreement”) which will enable it, subject to shareholder approval, to acquire an initial 30% interest in the Project.
The Project is located to the south of the island of Mindanao, The Republic of The Philippines and comprises 10 coal Blocks, each having an area of approximately 10 square kilometers (giving a total Project area of approximately 100 square kilometres). Two of the Blocks have been the subject of significant historical drilling (32 holes) and other work, including the completion of a scoping study. The scoping study and various other evaluations of the two Blocks have estimated an in situ resource in excess of 200 million (non-JORC compliant) tonnes of coal. Dwyka considers that there is the potential to drill up a measured, defined resource of at least 150 million tonnes of coal within 24 months with the intention of bringing the Project into production. The remaining 8 Blocks are also located within the same geological coal basin, termed the Cotabato Basin, and have recently been proven to be coal bearing through a combination of drilling, pitting and trenching. Dwyka considers these Blocks to be highly prospective, with the potential to be of similar size or even exceeding the two main Blocks. The Company is also planning to initiate an extensive grid drilling programme on the remaining 8 Blocks, which will enable resource estimation and classification to occur within the next 12 months.
Historical analysis of the coal present at the Project suggests that it is of medium calorific value, approximately 5,300 Kcal/kg, making it suitable for both the export market to India and China and for in-country power stations and industrial (cement) purposes. The Philippines has ready demand for coal for power stations. Other coal miners in The Philippines are already exporting similar calorific value coal to India, China and Hong Kong.
Pursuant to the ACRL Option Agreement, the Company has an option (“ACRL Option”) to acquire 100% of the issued shares in Asian Coal Resources Limited (“ACRL”). In turn, ACRL and its local partner, MANA Resources Development Corporation (“MRDC”), collectively hold options (“Project Options”) which, if exercised, would enable them to acquire an initial 30% interest in the Project, with the possibility of increasing that to a maximum of 100%. In addition, ACRL is currently a 40% shareholder in MRDC and has an option to increase this to a 100% interest in MRDC. ACRL and MRDC are finalizing a shareholders’ agreement between them to ensure that the two entities act with a common purpose in relation to the Project.
The exercise of the ACRL Option (which would trigger the subsequent exercise by ACRL and MRDC of the Project Options, enabling an initial 30% interest in the Project to be acquired) is subject to the approval of Dwyka shareholders in general meeting under the ASX Listing Rules. In this regard, Dwyka will release a shareholder circular/notice of meeting in due course which will convene that meeting and will provide shareholders with detailed information about the proposed transaction and its effects.
It is anticipated that the Project costs through to January 2009, including initial option exercise expenses as well as costs related to further exploration and drilling, equipment purchases and staffing will be in the order of GBP10m. Dwyka will be responsible for funding those costs and it is proposed that this will occur primarily via a placement to institutional shareholders. Further staged payments, the first of which would occur in July 2009, would be payable should Dwyka elect to increase its Project interest above 30%.
Should shareholders vote in favour of the transaction, Dwyka intends to aggressively pursue development of the Project to bankable feasibility, with a view to commencing production as soon as possible.
Speaking today in relation to the signing of the ACRL Option Agreement, Melissa Sturgess, Chief Executive Officer of the Company said:
”We are very excited about the prospect of acquiring an interest in a project with the potential for near-term production, which is located in what we believe is the most significant recently discovered coal province in the Philippines. The Project will complement Dwyka’s existing assets and further our stated aim of diversifying into key commodities with a view to generating maximum value for shareholders. Given the strong global demand for coal and record prices experienced recently, the timing of this acquisition is excellent. We look forward to bringing the Project into production as quickly as possible to capitalise on these factors”.
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The technical exploration and mining information contained in the above announcement has been reviewed and approved by Ed Nealon, who has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is qualified as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Nealon is a Dwyka Resources Limited Director and meets the criteria of a qualified person under the AIM Guidance Note for Mining, Oil and Gas Companies. Mr Nealon is a member of the Australasian Institute of Mining and Metallurgy.
Ed Nealon consents to the inclusion in this announcement of such information in the form and context in which it appears.
For further information please contact:
Melissa Sturgess
Dwyka Resources Limited
(+44) 7825 555 1397 or [email protected]
In United Kingdom
Richard Brown
Ambrian Partners Limited
(+44) (0)20 7634 4700
Press enquiries
Charlie Geller or Leesa Peters
Conduit PR
+44 (0)20 7429 6604/ +44 (0)79 7006 7320
Or visit: http://www.dwyresources.com
DWY
dwyka resources limited
