PADANG RESOURCES LTD (PXR)

Transcription

1 PADANG RESOURCES LTD (PXR) Plans to Bring Paser Project into Production in 1Q 2013 SPECULATIVE Share Trading Info ASX Code 4 September 2012 PXR Current Share Price (cps) 0.8 Trading Low /High (Rolling Year) (cps) Total Ordinary Shares* (m) Mkt Captalisation (undiluted) $m 3.8 Cash as at 30 June 2012 ($m) 0.7 * Includes the issue of 125m PXR shares as part consideration for the Paser Project transaction Board of Directors Peter Woods Guy Le Page Ian Murie Major Shareholders Non Executive Chairman Shareholders issued shares as 26.4% consider'n for Paser acquisition* Non Executive Director Non Executive Director Spartan Nominees P/L 4.4% John Wardman & Associates 4.0% * As at the time of writing, substantial shareholder notices to the ASX pertaining to these holdings were not made and the name of the individuals/ entities holding these shares were not known Important Disclosure Investors should be aware that Padang Resources Ltd is a corporate client of Alpha and that Alpha will receive a consultancy fee from Padang Resources Ltd for compiling this research report INVESTMENT HIGHLIGHTS Potential for re-rating as PXR edges closer to production in 1Q2013 Technical Due Diligence completed on Paser Project; all approvals obtained. Drilling program to start in October Experienced In-country team (geological survey fast tracked; strong relationship with landowners) Indicative pricing for Paser coal at a premium (~8%) above current benchmark prices for Indonesian coal Management focused on Paser project and is reviewing additional projects within Paser region SUMMARY Padang Resources Ltd ( PXR or Company ) is proceeding with the acquisition of a 70% interest in the Paser Project, a coal project located in the East Kalimantan province, Indonesia, after completing technical due diligence. The Company has obtained the necessary approvals (including local government approval and shareholder approval) and are now planning to bring the Paser Project into production in 1Q The first step for PXR in the path to production is the acceleration of its drilling program, which will be designed to target a number of near-surface coal targets delineated from previous surface mapping, resistivity surveys and drilling. The proposed drilling program will be designed to confirm coal quality and the depth, thickness and spread of coal seams below surface. Subject to the availability of adequate funding, the indicative timetable for bringing the Paser Project into production is detailed in Table 1. PXR have already signed a MoU with a drilling company to begin drilling in October Volume ('000) PXR 6-month Price Chart Price (cps) Table 1: Indicative Timetable to Production at Paser Project 5,000 4,000 Price Volume Action Timeframe 3, Mobilise and Commence Drilling October ,000 1, Release of Drilling Results November Mine Plan (Subject to drilling results) December 2012 Commencement of Production 1Q 2013

2 Strategic Focus on the Paser Region PXR is committing all of its resources into bringing the Paser Project into production, with the Company reviewing additional coal projects within Kalimantan and in particular the Paser Region, ideally ones capable of producing up to 20,000t per month. Securing Landowner Approvals and Government Approvals Highlights Strength of In- Country Technical Team Anecdotally, Australian companies operating in Indonesia have experienced substantial costly delays as a result of not validating agreements held with land owners. In PXR s case, in addition to the Company validating agreements with the land owners, the land owners have also signed agreements stating their full support for the mining and sale of coal from the Paser Project. This point highlights the strength of the in-country technical team (led by In-country General Manager, Mr Mulyadi Hasan) to establish solid working relationships with the strategic stakeholders and implement these agreements to commence mining from the Paser Project. Changes to Board of Directors PXR has appointed Mr Peter Woods as the Non Executive Chairman of the Company. Mr Woods has extensive Board and political experience in both the public and private sectors, both nationally and internationally, especially the Asia Pacific. The former Chairman, Mr Guy Le Page, remains on the Board as a Non Executive Director. Figure 1: Location of Paser Project Approx. 127 kilometres SW from Balikpapan Source: PXR The Paser Project area covers a concession of 43ha and is located approximately 127 kilometres SW from Balikpapan. Good quality haul roads exist in and around the concession area. In particular, Jetty locations are within 14 kilometres of the concession and are within a short distance to a deep water harbour, with an existing operational port nearby. The distance by barge from the loading facility is ~30 kilometres. Page 2 of 7

3 RECENT WORK COMPLETED ON PASER PROJECT Completion of Geological Report In early July 2012, PXR received an independent geological report on the Paser Project, which was based on results from: i. A resistivity survey 1 completed in June 2012 quarter (20-lines each 235 metres in length) covering the 43ha concession area, undertaken in order to gain a better understanding of the vertical and lateral distribution of the coal seams in 2D/3D format and to profile the resistivity of coal and other soil layers in the ground, and ii. Geological data 2 from a 20 borehole program undertaken on the Paser Project. The geological report modeled the distribution of the resistivity of material below surface and producing an approximate indication of the potential depth, thickness and spread of coal seams within the boundaries of the concession area. The Geological Consultants identified three potential coal seams with a relative north-south pattern of strike and thicknesses varying from 0.4 metres to 3.4 metres, detailed in Table 2. Table 2: Coal Seam Thickness and Strike Direction of 3 Coal Seams Identified by Geological Consultants Seam Potential Thickness Strike Direction Seam metres 840 metres Seam metres 1,160 metres Seam metres 940 metres Source: Padang Resources Ltd ASX Announcement 2 July 2012 Figure 3 shows the map of the location of the 20 geoelectrical survey lines, as well as the interpretation of coal strike. Figure 2: Coal Seam (Left picture) and Haul Road (Right picture at Paser Project Source: PXR 1 The geo-electric resistivity method is one of the geophysical exploration methods commonly used to detect and map the presence of material in the subsurface based on the distribution of electrical resistivity parameters of rocks. This method has been widely applied to locate potential coal seams, for groundwater exploration (determination of aquifer), for analysis of soil structure for geotechnical purposes and the search for metallic minerals (such as iron ore, galena, manganese, nickel and chrome). 2 The geological data included drill core, bore hole data and independent coal quality analysis. Page 3 of 7

4 Figure 3: Location of Geoelectrical Survey Lines and Interpretation of Coal Strike Source: Padang Resources Ltd ASX Announcement 2 July 2012 Page 4 of 7

5 Confirmation of All Local Government Permits and Approvals PXR has verified a number of permits, as well as the necessary environmental approvals to commence mining from the Paser Project. These include: Local government approval to gain access to the Paser Project permit area and deploy an exploration team. Confirmation that the IUP holder has been awarded a UKL/UPL permit from the Environmental Impact Control Agency validating the completion of a satisfactory environmental impact assessment for coal mining to commence from the permit area. The permit area has been confirmed by the Forestry Services Department of Mining and Energy to be within a "Other Utilities Area" and not in a "Production Forest" or "Protected Forest" zone. Effectively, this approves coal mining from the permit area. Confirmation that the IUP holder (i.e. land owner) has a valid agreement with the owners of the network of roads within the permit and directly from the permit area to the jetty. Confirmation from the IUP holder has a permit to use the Jetty on the Apar River approximately 14 kilometres from the permit for the purpose of loading coal onto barges. Confirmation of Coal Quality PXR has confirmed coal quality from a single sample received during the geological survey. The sample returned a calorific value of 7,382 Kcal/kg, a total moisture content of 6.37%, an ash content of 7.52% and total sulphur content of 2.2%. This single sample confirmed the coal quality from nine samples provided by the vendor, which indicated the presence of a high-quality coal, underpinned by high calorific values averaging 6,841 Kcal/kg and ranging up to 7,692 Kcal/kg. Table 3: Summary of Nine Coal Samples at Paser Project (Provided by Vendor) Unit Basis Range Average Total Moisture % arb Inherent Moisture % adb Ash Content % adb Volatile Matter % adb Fixed Carbon % adb Total Sulphur % adb Calorific Value Kcal/Kg adb arb - dried basis adb air dried basis Source: Coal Samples Provided by Vendor to PXR Page 5 of 7

6 Indicative Pricing for Paser Coal Figure 4: Indonesian Coal Reference Price (US$/Mt) - 3-year Trend The Indonesian Coal Reference Price (HBA) as at August 2012 was US$84.65/Mt, based on coal quality with the following specifications: Calorific Value of 6,322 Kcal/kg, a total moisture content of 8%, an ash content of 15% and total sulphur content of 0.8%. The 3-year trend for the Indonesian Coal Reference Price is shown in Figure 4. Source: Coalspot.com Table 4 outlines the indicative pricing for: i) The single sample received during the geological survey and ii) The average values from the nine coal samples provided by the vendor, against two benchmark reference coal prices the Gunung Bayan I brand and the Prima Coal brand. The analysis indicates that the indicative pricing in August 2012 for Paser coal as per i) and ii) are higher than both benchmarks for similar quality coal. Table 4: Indicative Pricing for Paser Coal vs Benchmark Coal Single Paser Coal Benchmark Coal (Specification figures on adb basis) Sample (9-sample Avg) Gunung Bayan I Prima Coal Total Moisture (%) Ash Content (%) Total Sulphur (%) Calorific Value (Kcal/kg) Indicative/Benchmark Price (US$/Mt) Source: Alpha Securities, Coalspot.com Page 6 of 7

7 DIRECTORY ALPHA SECURITIES Corporate George Karantzias Research Analyst John Haddad Disclaimer This report is not for distribution and is not directed to, nor intended for distribution or use by, any person or entity in any jurisdiction or country where the publication or availability of this report or such distribution or use would be contrary to local law or regulation. This document has been prepared (in Australia) by Alpha Securities Pty Ltd ABN ( Alpha ), who holds an Australian Financial Services License (License number ). Alpha has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, Alpha makes no representation and gives no warranties about the accuracy or completeness of the information and material, including any forward looking statements and forecasts made by Padang Resources Ltd to Alpha, and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Alpha does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report, or as a result of errors or omissions on the part of Alpha or by any of their respective officers, employees or agents. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by Alpha carry no guarantee with respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investors should be aware that these risks might result in loss of income and capital invested. Neither Alpha nor any of its associates guarantees the repayment of capital. This report and any communication transmitted with it are confidential and are intended solely for the use of the individual or entity to which they are addressed. If you have received this in error please notify the sender. If you no longer wish to receive communication from Alpha, please contact Alpha requesting to be unsubscribed from future communications. General Advice Warning This report may contain general securities advice or recommendations, which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This report does not contain specific securities advice and does not take into account particular investment objectives, financial situation and needs of any particular person. You should carefully assess whether such information is appropriate in light of your individual circumstances before acting on it. Disclosure Alpha, its Directors and associates declare that they may have a relevant interest in the securities mentioned herein. This position can change at any time. Alpha also receives fees for advisory services. Alpha does and seeks to do business with companies covered in its research reports and investors should be aware that Alpha received a consultancy fee from Padang Resources Ltd for compiling this research report. Page 7 of 7