Annual Report to Shareholders
Perth, Sep 28, 2012 AEST (ABN Newswire) - Pan Asia Corporation Limited (
ASX:PZC) is pleased to provide the Company Annual Report to Shareholders for the year ended 30 June 2012.
REVIEW OF OPERATIONS
HIGHLIGHTS OF AN ACTIVE YEAR
- The JORC resource at TCM South was expanded from an initial 53.23 Mt to 128.8Mt, with seams for exploitation totalling 76Mt and a mineable resource of 49Mt.
- Drilling at TCM North targeting an increase to >200mt* was completed and intersected coal in all holes.
- A base case Feasibility Study was undertaken on TCM South concluding the project was technically and commercially viable
- "Clean & Clear" status (i.e. no competing claims) & "PMA" status (i.e. foreign ownership or locally known in Indonesia as "Penanaman Modal Asing") was obtained for the TCM project. These are important milestones and provide a solid legal foundation for the project.
- The Ranrich arrangements were restructured with the US$4.5 Million loan being repaid to Pan Asia / Noble and Pan Asia additionally receiving a free carried royalty of USD 1/t (up to US$15million) on the PT Baramega Citra Kutim Permai ("BCKP") exploration project in East Kalimantan
- Pan Asia established a compact but capable team in the Company's Jakarta office providing strong technical, accounting and administrative support to the Company's operations in Indonesia.
Overview
During the year, Pan Asia Corporation Limited ("Pan Asia" or "the Company") made significant progress with its flagship underground high CV thermal coal project, the PT Transcoal Minergy ("TCM") Project.
A busy drilling programme at TCM South resulted in a total JORC resource of 128mt being established. This was followed by additional drilling at TCM North targeting an increase to 200mt or more*. Drilling in the north was positive with coal being intersected in all holes and an updated JORC resource will be completed soon when all results have been received.
An independent base case feasibility study was undertaken assuming low recoveries and average coal prices over the last year. This study concluded that the project was technically and commercially viable.
However with a significant decline in world thermal coal prices (~30% over the year), the Company initiated a review of the base case with particular scrutiny on expected recoveries and capital expenditure. Feedback from a leading underground coalmine design group with considerable experience in TCM style ground conditions has given the Company confidence that recoveries should be significantly higher than that assumed in the base case.
The Company is currently in the process of appointing this group to update the mine plan and feasibility study with a view to offsetting the impact of recent falls in coal prices. This updated study will then form the basis for development for this project with expected improvements in midterm coal prices also providing a "rising tide".
This should deliver the project to a significantly value added point in an improved macro environment where shareholders can realise full value for this emerging asset.
TCM Project (75% interest in Production Mining Business Licence ("IUP") - South Kalimantan)
The TCM Project is situated in the Tanah Bumbu Regency of South Kalimantan, approximately 51km from Batulicin. It is adjacent to the east of Arutmin's ATA open pit coal mine and as such it benefits from having well known high CV coal quality and good established infrastructure.
During the year the Company undertook several phases of drilling on the TCM project. Drilling in the south resulted in the JORC resource increasing to 128mt while subsequent wider spaced drilling in the north was completed targeting to increase this to more than 200mt in total. Coal was intersected in all holes in the north where expected and the update to JORC will be completed soon after all results are processed.
As part of a base case Feasibility Study undertaken by European group Kopex, the seams for exploitation totalled ~ 76 million tonnes with the mineable resource estimated at ~ 49 million tonnes and mineable reserve at ~25 million tonnes (based on a very conservative 50% recovery). The run of mine material contains parting, that is the claystone between (and necessarily mined together with) the two main coal seams to be mined. After washing out the parting, the sellable tonnes were estimated to be ~ 18 million tonnes.
Based on this, project parameters for TCM South were established as below:
- High CV coal: ~ 6200 GAR
- Target Sellable Coal: 1.5mt pa
- Mine life: 15 years +
- Operating Cost / t on MV: USD 52/t
- Style of Mining: Mechanised Longwall Preferable
Peer review by a leading underground coal group with very extensive experience in similar ground conditions to the TCM project indicate that recoveries of at least 60%, if not 70%, should be achievable which should substantially increase mineable reserves at TCM South. The additional tonnages that come from TCM North would also support a larger & longer life operation.
The TCM product is very marketable commodity. It is characterised as a High Volatile (C) Bituminous Coal in accordance with ASTM D388-05. All thermal properties associated with TCM products are highly suited to power generation, cement manufacture or general industry. The coal has low chemical impurities making it environmentally suitable for export.
Ash fusion temperatures are very high for Indonesian coal and are in line with Australian thermal coal products. TCM coal has low slagging and fouling index and this is highly beneficial in boiler performance and fly ash recoveries.
Foreign ownership structure completed
PT Transcoal Minergy received full official foreign owned company status in June 2012 from the Capital Investment Coordinating Board ("BKPM") in Indonesia by way of conversion of TCM from an Indonesian company to foreign owned status in the form of a PMA company (known locally in Indonesia as "Penanaman Modal Asing"). This PMA approval is an important milestone that facilitates the planned incoming substantial foreign investment for the development of the project.
Clean & Clear Status received
The Company received Clean and Clear status for its TCM Project from the Ministry of Energy and Mineral Resources (MoEMR) in Indonesia, by way of official release in May 2012. The designation of "Clean and Clear" provides comfort to mining companies that the validity of their relevant mining concession, and in this case Pan Asia's flagship TCM Project, has been scrutinized by MoEMR who have determined that the concession does not overlap with other concessions.
Ranrich Settlement
The Company moved early in the year to restructure its arrangements with Ranrich Investments Limited (RRI) following 18 months of RRI struggling to meet its coal delivery shipments to Pan Asia's designated buyer.
Ranrich Investments Limited, (a company controlled by Honardy Boentario) and Innovation West Pty Ltd (IW), (a company wholly owned by Pan Asia Corporation Limited) originally entered into a Memorandum of Agreement in 2010 for the financing of and investment in various coal projects. The repayment of the finance was based on RRI making contracted coal shipments to a designated buyer arranged by IW. Since entering into the original financing arrangement, RRI struggled to provide the scheduled coal deliveries and as a result, Pan Asia moved to restructure the arrangements and to have the principal monies outstanding under the contract repaid.
A Memorandum of Agreement was executed in the presence of a Notary in Jakarta in February 2012 with the parties agreeing to the following material terms:
- Repayment to Pan Asia of the amount outstanding of US$4.5m;
- Pan Asia exchanges its right to earn a 50% interest in BCKP for a royalty of US$1 per tonne on all coal sold from the BCKP IUP, limited to a total of US$15m;
- Ranrich undertook to deliver its current outstanding contracted shipments, at the time being ~220,000MT of coal to Pan Asia's designated buyer.
Following the restructured arrangements, Honardy Boentario tendered his resignation as a director of Pan Asia in June 2012.
Summary & Prospects
The Company established a significant resource of high CV coal with good logistics and infrastructure at its flagship TCM project. Two key legal approvals for this project were also obtained and a base case feasibility study undertaken concluding that the project was technically and commercially viable. While coal prices retreated during the year, initial peer review of the base case study provides significant scope to offset lower revenue from current softer lower coal prices.
The Company now plans to update the study to optimise recoveries and capex with a view to achieving maximum value for all shareholders as we move discussions forward with possible development / offtake partners.
We thank you all for your ongoing support during what has been a significant down year for equities and commodities and look forward to the coming year with great expectation.
View the complete Pan Asia Corporation Annual Report at the link below:
http://media.abnnewswire.net/media/en/docs/ASX-PZC-606117.pdf
Contact
Pan Asia Corporation Limited
T: +61-8-9381-5819
F: +61-8-9388-3701
WWW: www.panasiacorp.com.au
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