Southern Arc to sell West Lombok property

Southern Arc Minerals has entered into a binding term sheet with PT Ancora Indonesia Resources (AIR) to sell its Singaporean subsidiary which holds an IUP on the West Lombok Gold Project on Lombok Island in Indonesia. The projects includes three main prospects Pelangan, Mencanggah and Selodong.

PT AIR, an Indonesian public company listed on the Jakarta Stock Exchange, will acquire Indotan Lombok Pte Ltd, which owns 90% of Indonesian company PT Indotan Lombok Barat Bangkit, the holder of the West Lombok IUP.

The property covers a 13km long by 7km wide northwest trending structural corridor of mineralisation and alteration hosting the Pelangan epithermal gold prospect, the Mencanggah epithermal/porphyry district and the Selodong porphyry intrusive complex.

PT AIR will pay Southern Arc US$2 million and will grant the company a 3% net smelter return royalty on any production from the property. PT AIR may buy back this royalty at any time for US$2 million.

Southern Arc will provide a loan of US$1 million to PT AIR which will be used specifically to cover costs of drilling and geological consultants to work towards 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.

Completion of the acquisition is subject to a number of conditions including due diligence to be completed in 45 days, assignment of the existing royalty agreement and finalising the loan and royalty agreement with the Southern Arc, to be completed in 60 days.