PT Ensbury Kaiteng Mining holds five mining concessions over mining blocks totaling 21,110 hectares. One of the five blocks has been in production since 2011. Photos: Company
Johanes Kotjo (formerly chairman of a few listcos, including Van Der Horst) holds an effective 15% interest in Gain Capital Group, which is a 90% vendor of the target company, Ensbury International.
Photo by Sim Kih With maiden coal shipments set to be delivered by its mines in Indonesia in early 2016, BlackGold Natural Resources has widened its focus and is set to acquire a profitable gold mine in the country.
BlackGold has signed a non-binding term sheet to acquire 100% of Ensbury International and its subsidiaries for an indicative price of US$100 million.
BlackGold has begun its due diligence of the Ensbury group.
Set up 3 years ago, BlackGold was listed on the Catalist board in March this year through a reverse takeover of NH Ceramics (whose building materials business has since been disposed of).
It has reported 200 million tonnes of coal resources from an explored area of 7,500 hectares, or 15.5% of its 48,910-hectare concession.
Philip Rickard, CEO of BlackGold Natural Resources in the company's office in Suntec City. Photo by Sim Kih It has two offtake agreements, and one coal supply tender award from Indonesian state-owned electricity company, PT PLN.
"We are focused 100% on supplying coal to power plants, instead of the usual trading of coal," said CEO Philip Rickard. "We are on fixed terms, fixed prices, fixed margin long-term contracts."
The fixed margin (25% in this case) on government contracts arose out of the government's experience with unstable supply to its power plants because coal miners would rather export their coal when prices are high and stop operations (at least temporarily) when coal prices are low.
BlackGold, which has no revenue currently, will start delivering coal under its offtake agreements in 1Q or 2Q next year, said Mr Rickard.
Intekhab Khan, non-executive chairman of BlackGold Natural Resources, is a lawyer by profession. He is Managing Director of M & A Law Corporation.
Photo by Sim Kih Why go for gold?
BlackGold was not content to just develop its coal business.
Given that gold-mining operating costs in Indonesia are among the lowest in the world ('all-in sustaining costs' is less than US$500 per ounce while gold traded at US$1,154 an ounce recently), BlackGold sought a gold-mining company to acquire that would be earnings-accretive.
"We didn't want greenfield projects but an asset that is already producing and also has exploration and production upside."
PT Ensbury Kaiteng Mining fits the bill: It holds five mining concessions over mining blocks totaling 21,110 hectares.
One of the five blocks has been in production since 2011 while the remaining four are under feasibility studies. These are expected to be completed this year for two of the blocks.
The indicative price of US$100 million is the top level price and would be adjusted downwards depending on the outcome of the studies.
The US$100 million would be paid for in cash and/or new shares of Blackgold.
Mr Intekhab Khan, non-executive chairman of BlackGold Natural Resources, said some institutional investors and fund managers have indicated an interest in the proposed acquisition.
For now, Mr Rickard would only say that the Ensbury group is profitable but declined to reveal details.
Signboard at site. Photo: Company At its site in Central Kalimantan, just two hours by road through palm oil plantations from Pangkalan Bun town, it is currently delivering 300-400 tonnes of ore a day with about 60 workers.
Its production capacity is 1,200 tonnes a day and the intent is to ramp up production to the maximum over the next few years with capex of US$1-2 million invested, he said, adding that machinery costs have come down because of a slump in various mining industries.
PT Ensbury plans to export the mined gold and has the licence to do so tax-free.
BlackGold's intended purchase of the gold-mining business is subject to shareholder approval at an EGM -- which is expected to take place 6-7 months from now.
Related story:RESOURCES PRIMA: 5 takeaways from FY15 results briefing