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Straits Asia acquires Jembayan coal mine in East Kalimantan

Monday, November 5th, 2007

Straits Asia Resources Limited announce that it had entered into a definitive sale and purchase agreement to acquire a 100% interest in the Jembayan coal mine in East Kalimantan (“Jembayan”) for a total purchase consideration of US$350 million.
The purchase consideration of US$350 million will be settled through US$275 million in cash and the issue of 75.09 million new SAR shares to the vendors, representing 6.9 % of Straits Asia’s enlarged issued share capital.
This announcement follows an earlier announcement released on 27 September 2007 regarding the signing of a Memorandum of Understanding between Straits Asia and the Jembayan vendors.
Jembayan is located approximately 150 kilometres North West of Balikpapan and approximately 70 kilometres from the sea. The mine has been operating since 2004 with substantial year-onyear ramp up. For the financial year ending December 2007, Jembayan is estimated to produce approximately 4.0 million tonnes of coal.
The Jembayan concession covers a total area of nearly 13,000 hectares. Using present records, an independent review of the coal deposits has identified non-JORC classified reserves and resources of approximately 41 million tonnes and 115 million tonnes respectively. Only 48% of the total concession area has been explored, implying significant reserve and resource upside potential.
Commenting on the transaction, Richard Ong, CEO of SAR said, “This is a fantastic opportunity for Straits Asia to expand its thermal coal mining business in Indonesia. Jembayan is an outstanding coal mine with excellent infrastructure. I am delighted with this transaction and that the vendors will hold a stake in the future of the combined businesses.”
“The acquisition will deliver immediate benefits to Straits Asia as it allows us to expand our 2008 production to a target of around 8.5 million tonnes to 9.5 million tonnes from our two mines. The coal quality is of higher grade and contains low sulphur which is the kind of quality that our customers demand. By acquiring the Jembayan mine, we also diversify our risk of relying on a single mine. Furthermore, Straits Asia will embark on an extensive exploration programme over the next 12 months to prove up and expand the Jembayan resource base to JORC standards. We believe the exploration upside is significant.”
“Our growing production and resource base, and the strong outlook for thermal coal prices provide us the platform to grow further, and deliver outstanding returns to our shareholders,” said Mr Ong.
“We therefore maintain our positive outlook for thermal coal prices, and this acquisition reinforces our positive view about doing business in Indonesia.“
Macquarie Securities (Asia) Pte Limited is acting as financial advisor to Straits Asia on the transaction.
For further information visit: www.straitsasia.com

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