Kalimantan Gold Corporation Limited

Kalimantan Gold Corporation Limited

December 13, 2010 02:01 ET

Term Sheet With Major Copper Mining Company on KSK Project

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 13, 2010) - Kalimantan Gold Corporation Limited (TSX VENTURE:KLG)(AIM:KLG) (the "Company") is pleased to announce that it has signed a non-binding term sheet (the "Term Sheet") with a major copper mining company (the "Major") in relation to its KSK Contract of Work copper project (the "KSK CoW") in Kalimantan, Indonesia. The Major may earn up to a 75% interest in the Company's KSK CoW by meeting certain project expenditure obligations and completing a bankable feasibility study ("BFS").

The Term Sheet provides that, concurrent with or after a 60-day due diligence period, the parties may negotiate and sign a binding agreement setting out transaction terms and structure. Within 15 days after signing that agreement the Major would subscribe to a C$350,000 private placement in the Company priced in the context of the market at that time.

The Term Sheet would allow the Major to undertake a substantial exploration program on the KSK CoW in order to earn an initial 51% joint venture interest by funding US$7 million over three years. Within 12 months of signing a binding agreement the Major must fund a minimum of US$3 million drilling testing, which must include drill testing of the three high priority targets; the Beruang Tengah, Beruang Kanan and Tambang Huoi prospects, and includes an allowance of US$500,000 for resource delineation drilling at Beruang Kanan. The Company will be the operator during this initial phase under the direction of the Major. 

The main focus of the exploration program will be drill testing the deeper porphyry copper targets that have been identified on the KSK CoW. These targets are permitted and drill ready, with recent advanced inversion modeling identifying numerous massive deep seated magnetic bodies below extensive surface geochemical anomalies and existing drill holes where copper mineralization was present. The three highest priority targets identified are the Beruang Tengah, Beruang Kanan and Tambang Huoi prospects, which are all expected to be drill tested in the first year of the program. Previous drilling results at Beruang Kanan have included intersections of 167 meters at 0.59% copper from 4.5 meters, 79 meters at 0.89% copper from 6.5 meters and 102 meters at 0.62% copper from 3 meters. Further details on the inversion modeling and identified targets are contained in technical reports on the Company's website at www.kalimantan.com

After earning the 51% interest, the Major would have the right to earn a further 24% (total 75%) by sole funding the completion of a feasibility study. The Major will make reasonable business efforts to complete the feasibility study within ten years. If the Major ceases to fund, its interest earned in the KSK CoW will convert to a 1% NSR royalty capped at its investment in the KSK CoW.

The Major will continue to sole fund until the partners approve development of the project. If the project is feasible for development and the joint venture has made an affirmative decision to mine, the Major would use commercially reasonable efforts to arrange reasonable project financing on terms mutually agreeable to each of the parties with both parties pledging their interests in the project if required.

The Company looks forward to working exclusively with the Major to negotiate and execute a binding agreement and then to rapidly mobilise a drilling team to commence testing the major porphyry copper targets the Company has identified on the KSK CoW. 

For further information please visit www.kalimantan.com.

RFC Corporate Finance Ltd acts as KLG's Nominated Adviser for the purposes of its AIM listing, contact Stuart Laing, ph: +618 9480 2506 or email: stuartl@rfc.com.au.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Kalimantan Gold Corporation Limited
    Rahman Connelly
    Deputy Chairman and CEO
    +61 7 552 32298 or Mobile: +61 418 116 955
    Kalimantan Gold Corporation Limited
    Gerald Cheyne
    Director Corporate Development
    +44 (0) 2077311806 or Mobile: +44 (0) 7717473168
    Alexander David Securities Limited
    Bill Sharp/David Scott
    +44 (0) 20 7448 9820