ASX ANNOUNCEMENT

6 October 2011

Palace Resources executes agreement to

acquire Lumpo Resources Pte Ltd
Highlights

Palace Resources has entered Memorandum of Understanding (MOU)

acquire 100% of Lumpo Resources Pte Ltd (Lumpo)

to

Lumpo has entered into a binding MOU to acquire a 65% joint venture interest in a
prospective coal project in West Sumatra, Indonesia (Sumatran Project)

Sumatran Project comprises of a 922.7 hectare production licence (Izin Ushua

Pertambangan Produksi or IUP) with all environmental and mining approvals in
place

Pre-feasibility study indicates mining, haulage and transhipment costs of approx

US$70/tonne FOB

High quality coal commanding premium prices in excess of US$200/tonne

Palace Resources has a strong relationship with Indonesian locals and local
officials

The Sumatran Project has developed roads and good access to export
infrastructure.

Palace Resources Limited (ASX: PXR) (Palace or Company) is pleased to announce that
it has signed a conditional and binding MOU with the shareholders of Lumpo Resources
Pte Ltd (Vendors), a company incorporated in Singapore, to acquire all of the issued
shares in the capital of Lumpo (Acquisition).
Lumpo has entered into a conditional and binding MOU with PT Tambang Batubara
Lumpo (TBL), a company incorporated in Indonesia, to acquire a 65% joint venture
interest (JV Interest) in its coal project in Western Sumatra, Indonesia (Sumatran
Project).
Palace believes that the Acquisition will bolster the Companys aggressive exploration
drive into Indonesia and will assist its continuing efforts to develop key partnerships in the
region.
Overview of the Sumatran Project
The Sumatran Project covers a total licence area of approximately 922.70 hectares.
Palace Resources recently completed a preliminary site visit and is currently in the
process of mobilising an exploration team for the Sumatran Project. This team will include
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a competent person for the purposes of the JORC Code who will be instructed to
undertake work to prove up the projects resource to a JORC Code compliant standard.
Acquisition Terms
Under the Acquisition, Palace will acquire all of the issued capital of Lumpo for the
following consideration:
a)

75,000,000 fully paid ordinary shares in the capital of Palace (Shares);

b)

Reimbursement of Lumpos investment in the project up to a maximum of

US$250,000; and

c)

A royalty of US$10/tonne from production.

Shares shall be escrowed for a period of 12 months from the date of issue (or longer
period if required by the ASX Listing Rules).
Conditions Precedent
Completion of the Acquisition is subject to a number of conditions precedent, including:
a)

the Company completing financial and legal due diligence on Lumpo and the
Company being satisfied with the outcome of those due diligence investigations;

b)

each party obtaining all shareholder and regulatory approvals necessary for the
Acquisition;

c)

the entry into a formal binding joint venture agreement to develop the Sumatran
Project between the Vendors and TBL, on conditions or on terms satisfactory to
Palace;

d)

Palace and the Vendors entering into a formal share sale agreement to fully
document the terms of the Acquisition; and

e)

prior to completion of the Acquisition, there being no material adverse change to

the business, financial or trading position, assets or liability, profitability or
prospects of the Vendors, their business and assets.

These conditions precedent must be satisfied or waived on or before 13th January 2012.
As announced to ASX on 12 September 2011, the Company has completed legal due
diligence on the Sumatran Project which confirms that the Sumatran Projects IUP is valid
in accordance with Indonesian laws. It is now focused on undertaking technical due
diligence to verify the information that has been provided by TBL.
On completion of the Acquisition, all members of the current board of Lumpo will resign
and nominees of Palace will be appointed to the board of Lumpo.
Joint Venture Interest
The MOU between Lumpo and TBL in relation to the JV Interest provides that the parties
will enter into a formal binding joint venture agreement (Joint Venture Agreement) in
relation to the Sumatran Project, conditional upon:
a)

Lumpo conducting and being satisfied with the outcome of their legal and technical
due diligence investigations in respect of TBL and the property of the joint venture;

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b)

each party obtaining all shareholder and regulatory approvals necessary to enter
into the Joint Venture Agreement;

c)

Lumpos board of directors approving Lumpos entry into the Joint Venture
Agreement; and

d)

prior to entering into the Joint Venture Agreement, there has been no material
adverse change to the business, financial or trading position, assets or liability,
profitability, prospects, business of TBL or the property of the joint venture.

These conditions must be satisfied or waived on or before 13 January 2012.

Under the Joint Venture Agreement, the participating interests of the parties in the joint
venture shall be 65% Lumpo and 35% TBL.
The parties will form a management committee to which Lumpo will be entitled to appoint
three members and TBL one.
The joint venture will appoint a manager and subject to the control and direction of the
management committee, the manager shall have day to day management control of all
joint ventures operations in respect of the IUP. Subject to the approval of the
management committee, the manager will initiate a boring program as soon as practically
possible (subject to completing drilling grid plan, obtaining rigs and all necessary
approvals) following the date of execution of the Joint Venture Agreement, with the
intention of drilling at least 30 holes averaging up to 60 metres and a minimum total of
1,800 metres of boring.
Next steps
Palace will keep shareholders informed of any material developments regarding the
Acquisition.

Yours faithfully

Nicholas Clark
Managing Director
+61 8 9429 2900
About Palace Resources
Palace Resources goals are to create a sustainable exploration and development
business focussed on resource opportunities in the Indonesian resource rich region.
Palace has a strong management team which has a track record of acquiring and
developing mineral projects in the Asia Pacific region. Palace is aggressively exploring
and developing resources in the south-east Asia region, particularly Indonesia.
For more information visit www.palaceresources.com.au

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