MUI Corporation executes deed of amendment on option to acquire Mongolian Coal License
MUI Corporation (ASX: MUI) and Inner Mongolia Xinyuan Mining Co Ltd of China (IMXM) have executed a deed of amendment relating to the original “Put and Call Option Deed" for the acquisition of a Mongolian coal license.
On April 20 the company entered into the option agreement to acquire the Inner Mongolia Coal project licence from IMXM that is located in a proven coal, oil and gas basin in the Bayahue formation.
Situated near China, the largest coal consuming country in the world, the project's proximity to the China markets would see freight cost advantages and delivery times building economies of scale for the business.
Also, the project’s close proximity to infrastructure would potentially provide access to high demand coal customers generating faster returns at less cost.
IMXM must show the viability of the project by distinguishing a 750 million tonne coal JORC Inferred Resource to proceed with the acquisition.
IMXM has advised MUI that it has discovered coal in the Licence area and will commence the next phase of the drilling program promptly, with a view to defining a JORC coal resource.
The amending deed relates to the reimbursement of drilling costs being capped at $3 million and which must be approved by the MUI board before they are reimbursed.
Also, the payment of drilling costs approved by the board has been postponed to settlement which provides a boost the company’s cash requirements.
In addition, the amending deed also includes:
- Extension of the due diligence period and option exercise period to 20 October 2011 to enable the company to complete its due diligence;
- A conditions precedent to settlement that MUI is to undertake a capital raising sufficient to fund all cash payments required to be paid under the Put and Call Option Deed (including the reimbursement of drilling costs).
The company expects a raising of at least $5 million and possibly at least $8 million if the $3 million payment for defining a 500 million tonne coal resource is likely to be required in the near term.
During the extended period MUI Corporation intends to complete its due diligence investigations and in particular receiving the necessary information to allow independent experts to complete their assessment of the project.
The company said it is continuing to explore other coal opportunities.
On April 20 the company entered into the option agreement to acquire the Inner Mongolia Coal project licence from IMXM that is located in a proven coal, oil and gas basin in the Bayahue formation.
Situated near China, the largest coal consuming country in the world, the project's proximity to the China markets would see freight cost advantages and delivery times building economies of scale for the business.
Also, the project’s close proximity to infrastructure would potentially provide access to high demand coal customers generating faster returns at less cost.
IMXM must show the viability of the project by distinguishing a 750 million tonne coal JORC Inferred Resource to proceed with the acquisition.
IMXM has advised MUI that it has discovered coal in the Licence area and will commence the next phase of the drilling program promptly, with a view to defining a JORC coal resource.
The amending deed relates to the reimbursement of drilling costs being capped at $3 million and which must be approved by the MUI board before they are reimbursed.
Also, the payment of drilling costs approved by the board has been postponed to settlement which provides a boost the company’s cash requirements.
In addition, the amending deed also includes:
- Extension of the due diligence period and option exercise period to 20 October 2011 to enable the company to complete its due diligence;
- A conditions precedent to settlement that MUI is to undertake a capital raising sufficient to fund all cash payments required to be paid under the Put and Call Option Deed (including the reimbursement of drilling costs).
The company expects a raising of at least $5 million and possibly at least $8 million if the $3 million payment for defining a 500 million tonne coal resource is likely to be required in the near term.
During the extended period MUI Corporation intends to complete its due diligence investigations and in particular receiving the necessary information to allow independent experts to complete their assessment of the project.
The company said it is continuing to explore other coal opportunities.
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